Cost control practices and related controller skills in Malta based hotels : an evaluation

Abstract

Purpose: This study seeks to evaluate cost control systems in selected 4 star and 5 star hotels in Malta and to compare such systems with the accepted practices elsewhere. No local literature related to this area is yet available. This study evaluates and compares the food and beverage cost control systems within the selected establishments. A comparison is then made between what is actually done in practice with the literature on food and beverage cost control. The researcher attempts to analyse strengths, weaknesses and possible skill gaps of Cost Controllers in meeting company demands as well as to come up with recommendations for improvements.

Design: The objectives of this study were achieved by conducting semi-structured interviews as the main research tool for this dissertation. Interviews were made with the Financial Controller and Cost Controller of the respective 4 star and 5 star hotels in Malta. A total of seventeen interviews were conducted.

Findings: The study’s findings demonstrate that, the operation of food and beverage cost control in the hotels interviewed basically follows the same principles as those stated by foreign researchers. This research study outlines that having an effective cost control system where wastages and variances are minimised and caution is taken with regards to price, quality and quantity, would reduce such costs thus leading to higher margins. A Cost Controller needs to have certain skills, such as experience and good communication, to enhance the effectiveness of the cost control system. Information technology today plays a very important part. Hotel operation nowadays is fully computerised. Thus, as a Cost Controller, being knowledgeable in such technology is essential. This research also shows the significance of advantages and disadvantages of food and beverage cost control systems.

Conclusions: Similarities between the cost control systems in the selected hotels exist. All of the Cost Controllers interviewed demonstrated a strong intent and ability to manage their costs well, with particular focus on areas such as variances, slow-moving stocks and expiry dates which greatly challenge the cost control systems. Moreover, various Information Technology tools and techniques are being implemented in hotels to help hoteliers arrive at a more efficient cost control system. These tools have become a must, and failing to use such tools will halt the operations of a hotel and put the hotel at a disadvantage when competing with other local hotels.

Implications/Value: The hospitality industry is an important sector for the Maltese economy. Cost control has also experienced a rapid transformation in scope, as management demands more value-added, strategic support from their Cost Controller in analysing costs and ensuring that proper and adequate margins are acheived. The implementation of cost controls within the food and beverage department is of great importance since the latter is one of the main areas where the majority of costs are incurred and where the hotel can be most profitable. This study attempts to put forward a number of recommendations which one can apply to implement a better cost control system.