Hospitality Financial Management

by Agnes L. DeFranco (University ; of Houston, TX ); Thomas W. Lattin (University of Houston, TX )

• ISBN13: 9780471692164
• ISBN10: 0471692166
• Format: Hardcover
• Copyright: 2006-10-01
• Publisher: Wiley

Summary

Real-world advice for quick retention of the most important business concepts and skills of hospitality finance Hospitality Financial Management provides a straightforward, practical approach to help the hospitality manager effectively analyze hospitality industry management reports and financial statements; prepare accurate business forecasts, strategic pricing models, and effective cost-control systems; manage working capital; develop and finance growth strategies; perform investment analysis; prepare investment packages; negotiate and structure business deals; and ultimately increase shareholder value and personal wealth. This comprehensive how-to book includes: Feature Stories-brief histories of famous hospitality leaders highlighting how they have used financial management skills to attain success for their companies and significant financial rewards for themselves Learning Outcomes-a summary of key topics covered in each chapter Finance in Action-scenarios that apply the concepts, skills, and techniques presented in the chapter to real-world situations. A step-by-step solution is provided for each problem to walk the reader through the necessary financial calculations The Real Deal-boxed inserts that emphasize the relevance of the book by linking financial concepts to fun facts associated with situations students either have or will encounter in their everyday lives Concept Checks-case studies that reinforce the materials presented and enable students to practice their analytic and problem-solving skills Hospitality Financial Management is the perfect book for undergraduate and graduate hospitality management students, hospitality industry managers, and owners of small hospitality businesses.

Author Biography

Agnes DeFranco is a Professor of Finance and Accounting at the Conrad N. Hilton College of Hotel and Restaurant Management at the University of Houston. Her research areas are hospitality finance, cost control, accounting, and cultural and diversity issues. She has been recognized with the Dean's Award for Excellence in Applied Research. She is also the 2006–2007 President of the Hospitality Financial and Technology Professionals, an international professional association formed in 1952 with over 4,600 members worldwide.

Thomas Lattin is a CPA who has earned partner status with three international hospitality accounting/consulting firms and served as president of a national hotel management company as well as president of a publicly traded hotel real estate investment trust. He is currently the Sir Rocco Forte Executive in Residence at the Conrad N. Hilton College at the University of Houston and Managing Director of Lattin & Associates, a management consulting firm.

Table of Contents

Preface	ix
Acknowledgments	xi
Finance and the Hospitality Industry	1	(14)
Introduction	5	(10)
Hospitality Industry Financial Challenges	6	(2)
Chapter Structure	8	(1)
Chapter Topics	9	(6)
Financial Reporting	15	(38)
Financial Reporting	17	(36)
Accounting as the Language of Business	17	(4)
Financial Statements	21	(4)
Management Reports	25	(13)
Accounting System---CP3 System	38	(15)
Analyzing Financial Statements	53	(38)
Analysis of Financial Statements	56	(35)
Readers of Financial Statements	56	(1)
Types of Analyses	57	(17)
Management Decision Making	74	(4)
Readers of Financial Statements Beware!	78	(13)
Managing Working Capital and Controlling Cash	91	(21)
Managing Working Capital and Controlling Cash	94	(18)
Working Capital	94	(3)
Cash	97	(15)
Growing the Business	112	(22)
The Need for Growth	115	(5)
Shareholder Value	115	(3)
Other Benefits of Growth	118	(2)
Growth Strategies	120	(14)
Increase Sales and Productivity of Existing Properties	120	(2)
Expansion of Physical Facilities	122	(1)
Franchise Brand Rights	123	(1)
Secure Additional Management Contracts	124	(1)
Mergers and Acquisitions of Competitors	125	(1)
Going Public	125	(9)
Financing Growth	134	(43)
The Need for Capital	138	(20)
Capital	139	(6)
Loan Terminology	145	(2)
Types of Loans	147	(3)
Sources of Loans	150	(3)
Equity	153	(5)
Hotel Financing Trends and Schemes	158	(19)
The Golden Age of Hotel Financing	159	(1)
Savings and Loans	159	(1)
Investment Tax Credits	159	(1)
Influx of Foreign Capital	159	(1)
Accelerated Depreciation	160	(1)
Real Estate Tax Shelters	160	(1)
The Tax Reform Act of 1986	160	(1)
The Resolution Trust Corporation (RTC)	160	(1)
New Financing Schemes	161	(16)
The Time Value of Money	177	(44)
Concept of Time Value of Money	179	(42)
Time Value of Money	179	(1)
Market Value	180	(2)
Calculating Time Value of Money	182	(23)
Time Period and Compounding	205	(16)
Investment Analysis	221	(26)
Investment Analysis	223	(24)
Weighted Average Cost of Capital (WACC)	224	(1)
Discount Rate	225	(1)
Capitalization Method of Valuation	226	(1)
Investment Analysis Tools	227	(9)
Factors Affecting Tools of Investment Decisions	236	(11)
Hospitality Industry Applications of Time Value of Money Concepts and Skills	247	(39)
Time Value of Money Applications	250	(36)
Loan Questions	250	(6)
Equity Questions	256	(2)
Use of Sensitivity Analysis	258	(1)
Hospitality Applications	259	(12)
Using ROI, NPV, and IRR	271	(15)
The Investment Package	286	(29)
The Need for an Investment Package	289	(26)
Executive Summary	291	(1)
Fact Sheet	291	(3)
Business Plan	294	(1)
Source and Use of Funds	295	(2)
Photographs or Renderings	297	(1)
Third-party Confirmation	298	(1)
Project Budget	298	(3)
Qualifications of Project Team	301	(1)
Investment Analysis	302	(1)
Personal Financial Data	302	(1)
Evaluation of the Investment Package	302	(1)
Lenders: Debt	303	(1)
Owner/Investor: Equity	304	(11)
Crafting and Negotiating the Deal	315	(30)
The New Business Venture	318	(7)
The Business Entity	319	(6)
The Debt and Equity Mix	325	(1)
Negotiating Loans with Lenders	325	(6)
Principal	327	(1)
Interest Rate	328	(1)
Points Charged	328	(1)
Additional Collateral	328	(1)
Personal Guarantees	329	(1)
Other Lender Issues	329	(1)
Deal Sponsor's Goals	330	(1)
Negotiating the Equity Investment	331	(2)
Amount of Equity	332	(1)
Percentage of Ownership	332	(1)
Investor Hurdle Rates	333	(1)
Exit Strategy and Decision-making Power on When to Sell	333	(1)
Negotiating Skills	333	(12)
Be Prepared	333	(1)
Be Professional	334	(1)
Use Proven Selling Skills	334	(11)
Tying It All Together	345	(20)
Introduction	348	(1)
Hospitality Industry Financial Challenges	348	(1)
Financial Reporting	349	(1)
Analysis of Financial Statements and Management Reports	350	(1)
Analysis of Financial Statements	350	(1)
Analysis of Industry Reports	351	(1)
Applications of Financial Analyses	351	(1)
Managing Working Capital	351	(1)
Growing the Business	352	(4)
Shareholder Value	352	(1)
Increasing Shareholder Value	352	(1)
Other Benefits of Growth	353	(1)
Growth Strategies	353	(3)
Financing Growth	356	(1)
Types of Capital	356	(1)
Cost of Capital	356	(1)
Mix of Capital	356	(1)
Investment Analysis	357	(3)
The Time Value of Money	357	(1)
Investment Analysis Methods	358	(1)
Favorable or Unfavorable?	358	(1)
Factors Impacting the Analysis	359	(1)
Hospitality Industry Applications	359	(1)
Debt and Equity Negotiations	359	(1)
The Investment Package	360	(2)
What Lenders Want to Know	360	(1)
What Equity Investors Want to Know	361	(1)
Crafting and Negotiating the Deal	362	(3)
Business Decisions to Make	363	(1)
Negotiating the Loan	363	(1)
Negotiating the Equity Investment	363	(1)
Negotiating Skills	363	(2)
Index	365