The Tax Reform Act of 1986: Impact On Hospitality Industries

In her discussion - The Tax Reform Act Of 1986: Impact On Hospitality Industries - by Elisa S. Moncarz, Associate Professor, the School of Hospitality Management at Florida International University, Professor Moncarz initially states: “After nearly two years of considering the overhaul of the federal tax system, Congress enacted the Tax Reform Act of 1986. The impact of this legislation is expected to affect virtually all individuals and businesses associated with the hospitality industry. This article discusses some of the major provisions of the tax bill, emphasizing those relating to the hospitality service industries and contrasting relevant provisions with prior law on their positive and negative effects to the industry. “On October 22, 1986, President Reagan signed the Tax Reform Act of 1986 (TRA 86) with changes so pervasive that a recodification of the income tax laws became necessary…,” Professor Moncarz says in providing a basic history of the bill. Two, very important paragraphs underpin TRA 86, and this article. They should not be under-estimated. The author wants you to know: “With the passage of TRA 86, the Reagan administration achieved the most important single domestic initiative of Reagan's second term, a complete restructuring of the federal tax system in an attempt to re-establish fairness in the tax code…,” an informed view, indeed. “These changes will result in an estimated shift of over $100 billion of the tax burden from individuals to corporations over the next five years [as of this article],” Professor Moncarz enlightens. “…TRA 86 embraces a conversion to the view that lowering tax rates and eliminating or restricting tax preferences (i.e., loopholes) “would be more economically and socially productive.” Hence, economic decisions would be based on economic efficiency as opposed to tax effect,” the author asserts. “…both Congress and the administration recognized from its inception that the reform of the tax code must satisfy three basic goals,” and these goals are identified for you. Professor Moncarz outlines the positive impact TRA 86 will have on the U.S. economy in general, but also makes distinctions the ‘Act will have on specific segments of the business community, with a particular eye toward the hospitality industry and food-service in particular. Professor Moncarz also provides graphs to illustrate the comparative tax indexes of select companies, encompassing the years 1883-through-1985. Deductibility and its importance are discussed as well. The author foresees Limited Partnerships, employment, and even new hotel construction and/or rehabilitation being affected by TRA 86. The article, as one would assume from this type of discussion, is liberally peppered with facts and figures.

E=MC3 Energy Equals Management's Continued Cost Concerns

E=MC³ Energy Equals Management's Continued Cost Concern, is an essay written by Fritz G. Hagenmeyer, Associate Professor, School of Hospitality Management at Florida International University. In the writing, Hagenmeyer initially tenders: “Energy problems in the hospitality industry can be contained or reduced, yielding elevated profits as a result of applied, quality management principles. The concepts, processes and procedures presented in this article are intended to aid present and future managers to become more effective with a sharpened focus on profitability.” This article is an overview of energy efficiency and the management of such. In an expanding energy consumption market with its escalating costs, energy management has become an ever increasing concern and component of responsible hospitality management, Hagenmeyer will have you know. “In endeavoring to "manage" on a day-to-day basis a functioning hospitality building's energy system, the person in charge must take on the role of Justice with her scales, attempting to balance the often varying comfort needs of guests and occupants with the invariable rising costs of energy utilized to generate and maintain such comfort conditions, since comfort is seen as an integral part of the "service," "product," or "price/value” perception of patrons,” says Hagenmeyer. In contrast to what was thought in the mid point of this century - that energy would be abundant and cheap - the reality has set-in that this is not the case; not by a long shot. The author wants you to be aware that energy costs in buildings are a force to be reckoned with; a major expense to be sure. “Since 1973, "energy-conscious design" has begun to become part of the repertoire of architects, design engineers, and construction companies,” Hagenmeyer states. “For instance, whereas office buildings of the early 1970s might have used 400,000 British Thermal Units (BTUs) per square foot year, new buildings are going up that use 55,000 to 65,000 BTUs per square foot year,” Hagenmeyer, like an incandescent bulb, illuminates you. Hagenmeyer references Robert E. Aulbach’s article - Energy Management – when informing you that the hospitality manager should not become complacent in addressing the energy cost issue, but should and must maintain a diligent focus on the problem. Hagenmeyer also makes reference to the Middle East War and to OPEC, and their influence on energy prices. In closing, Hagenmeyer suggests an - Energy Management Action Plan – which he outlines for you.

Global Pricing Strategy for a Quick-Service Restaurant Chain

The purpose of this paper is to compare prices for a popular quick-service restaurant chain (i.e. McDonalds’) across countries throughout the world using the “Big Mac Index” published by “The Economist.” The index was originally developed to measure the valuation of international currencies against the U.S. dollar. The analysis in this study examines the relationship between the price of a Big Mac and other variables such as the cost of beef, price elasticity, and income. Finally, these relationships are reviewed to draw inferences concerning the use of demand, costs, and competition in setting prices.

Protecting Your Assets: A Well-Defined Credit Policy Is The Key

In - Protecting Your Assets: A Well-Defined Credit Policy Is The Key – an essay by Steven V. Moll, Associate Professor, The School of Hospitality Management at Florida International University, Professor Moll observes at the outset: “Bad debts as a percentage of credit sales have climbed to record levels in the industry. The author offers suggestions on protecting assets and working with the law to better manage the business.” “Because of the nature of the hospitality industry and its traditional liberal credit policies, especially in hotels, bad debts as a percentage of credit sales have climbed to record levels,” our author says. “In 1977, hotels showing a net income maintained an average accounts receivable ratio to total sales of 3.4 percent. In 1983, the accounts receivable ratio to total sales increased to 4.1 percent in hotels showing a net income and 4.4 percent in hotels showing a net loss,” he further cites. As the professor implies, there are ways to mitigate the losses from bad credit or difficult to collect credit sales. In this article Professor Moll offers suggestions on how to do that. Moll would suggest that hotels and food & beverage operations initially tighten their credit extension policies, and on the following side, be more aggressive in their collection-of-debt pursuits. There is balance to consider here and bad credit in and of itself as a negative element is not the only reflection the profit/loss mirror would offer. “Credit managers must know what terms to offer in order to compete and afford the highest profit margin allowable,” Moll says. “They must know the risk involved with each guest account and be extremely alert to the rights and wrongs of good credit management,” he advocates. A sound profit policy can be the result of some marginal and additional credit risk on the part of the operation manager. “Reality has shown that high profits, not small credit losses, are the real indicator of good credit management,” the author reveals. “A low bad debt history may indicate that an establishment has an overly conservative credit management policy and is sacrificing potential sales and profits by turning away marginal accounts,” Moll would have you believe, and the science suggests there is no reason not to. Professor Moll does provide a fairly comprehensive list to illustrate when a manager would want to adopt a conservative credit policy. In the final analysis the design is to implement a policy which weighs an acceptable amount of credit risk against a potential profit ratio. In closing, Professor Moll does offer some collection strategies for loose credit accounts, with reference to computer and attorney participation, and brings cash and cash discounts into the discussion as well. Additionally, there is some very useful information about what debt collectors – can’t – do!

Accreditation: Implications For Hospitality Management Education

Accreditation was previously defined as a voluntary process in which recognition is granted to educational programs which meet or exceed established standards of educational quality. One of the inherent problems in the application of the accreditation process lies in the identification of educational quality, an elusive and subjective concept which creates the fear of the accreditation process becoming equally subjective. The author discusses this fear, along with other misconceptions regarding the implementation of accreditation in hospitality management programs at the baccalaureate level, concluding a two-part series begun in the Spring 1985 issue.

Training Methods Utlilized by Independent Restaurant Managers

Formal, systematic training has always been cited as a major need for the future success of hospitality operations. However, one other aspect of the job might be the development of a train-the-trainer curriculum for hospitality management students. The author studies the relationship between training preparation and training methods utilized by restaurant managers and explores this need.

Leveraged Buyouts in the Hospitality Industry: Five Years Later

When the author wrote her first article for the FIU Hospitality Review on leveraged buyouts' some five years ago, this business strategy was beginning to enjoy increasing popularity. Since that time leveraged buyouts grew to unprecedented levels both in number and size of transactions. However, following the failure of the UAL proposal and the collapse of the junk bond market in 1989, there has been a marked slowdown in buyout activity this article examines major developments affecting leveraged buyouts over the past five years and addresses their future implications for the hospitality industry.

Financial Planning by Contract Food Service Management Companies

Drugs in the workplace is a growing problem that threatens a valuable human resource - the employee. Managers in the hospitality industry can take a proactive stance in meeting the problem head on. The authors discuss what managers can do.

Controllers' Perceptions of the Importance of Accounting Skills to Lodging Managers

Are managerial accounting skills important to all managers? Which of the common managerial accounting skills are the most important to the non- accounting manager? The authors report on their descriptive research gathered from controllers in the hospitality industry which provides guide- lines for managers in these areas.

Wellness and Obesity: Implications for Health Care Costs Among Restaurant Managers

Overeating, inadequate exercise, work-related stress, and long working hours are accepted issues among restaurant managers. The underlying question was whether such life styles affect employers' health care cost and restaurant managers' health and ability to cope with imposed business requirements. The author discusses strategies to help employers reduce health care costs, increase employee productivity, and improve job satisfaction.

Cross-Cultural Cuisine: Long-Term Trend or Short-Lived Fad

Defining a consumer interest as a long-term trend or short-lived fad has significant implicatiosn for restauranteurs' management decisions. The terms "trend" and "fad" can be operationally defined for the food service industry. The authors examine today's popular cross-cultural cuisine to determine its trend or fad status and discuss the catalysts that promoted or hindered its trend/fad status, as well as implications for the food service industry.

Overcoming The Impotency Of Marketing

In his dialogue titled - Overcoming The Impotency Of Marketing - K. Michael Haywood, Assistant Professor, School of Hotel and Food Administration, University of Guelph, originally reveals: “Many accommodation businesses have discovered that their marketing activities are becoming increasingly impotent. To overcome this evolutionary stage in the life cycle of marketing, this article outlines six principles that will re-establish marketing's vitality.” “The opinion of general managers and senior marketing, financial, and food and beverage managers is that the marketing is not producing the results it once did and is not working as it should,” Haywood advises. Haywood points to price as the primary component hospitality managers use to favor/adjust their marketability. Although this is an effective tool, the practice can also erode profitability and margin he says. Haywood also points at recession as a major factor in exposing the failures of marketing plans. He adds that the hotel manager cannot afford to let this rationale go unchallenged; managers must take measures to mitigate circumstances that they might not have any control over. Managers must attempt to maintain profitability. “In many hotels, large corporate accounts or convention business generates a significant proportion of occupancy. Often these big buyers dictate their terms to the hotels, especially the price they are prepared to pay and the service they expect,” Haywood warns. This dynamic is just another significant pitfall that challenges marketing strategy. The savvy marketing technician must be aware of changes that occur in his or her marketplace, Haywood stresses. He offers three specific, real changes, which should be responded to. “To cope with the problems and uncertainties of the hotel business during the remainder of the decade, six components need to be developed if marketing impotency is to be overcome,” says Haywood in outlining his six-step approach to the problem. Additionally, forward thinking cannot be over-emphasized. “A high market share is helpful in general, but an even more crucial factor is careful consideration of the market sectors in which the company wants to operate,” your author advises. “Taking tactical initiatives is essential. Successful hotels act; unsuccessful ones react. The less successful marketing operations tend to be a hive of frantic activity. Fire-fighting is the normal way of life in such organizations, Haywood observes. “By contrast, successful firms plan and execute their tactical marketing activity with careful timing and precision so as to create the maximum impact,” he extends in describing his fruitful marketing arabesque.

Strategic Planning: Implications and Applications for Line Managers

Strategic planning is the key to producing a realistic, attractive rate of growth and a respectable return on investment. The author analyzes the steps in the planning process and looks at the environmental and cultural values which influence the strategic planner in his/her work.

Management Retention Factors in the School Foodservice Industry

Management retention in the school foodservice industry has been a growing concern for school district decision makers due to the large numbers of managers reaching retirement age and the shortage of qualified people to fill the positions. As with other foodservice positions, turnover rates and the shortage of service employees will continue to be challenges well into the 21st centery. The current study employed by a self-administered questionnaire and asked 101 school foodservice managers in Central Florida to rate their perceived importance of and their perceived experience with 20 employment characteristics of their job. There were significant differences in 17 of the 20 characteristics thus highlighting significant gaps between perceived importance and perceived actual experience on the job and what would keep them from changing jobs. Management and human resources implications are discussed.

Food Service Management: A Case Study in Adaptation

The rapid growth of the food service industry has redefined the role of the manager today. According to the executive director of the National Restaurant Association, future trends and pressures will accelerate these changes and necessitate a new look at these managers.