Hospitality Financial Leadership - Is Teaching Hotel School Students About Accounting a Waste of Time?
By David Lund, The Hotel Financial Coach
I have a dream. My dream is that the numbers, the numbers that so many managers agonize over in our industry, are just as accessible as guest service and employee engagement. Let me put this another way for more clarity: I want you and the other leaders and managers in your hotel to be just as comfortable dealing with the numbers as you are dealing with guests and colleagues.
You might be thinking that is a tall order. Well, I do not think so. I have seen many managers overcome their fear and confusion with the numbers. I also believe a big part of why the numbers scare so many people off is because we "seemingly" do not know how to teach them to our leaders. I also think that college and university hotel programs that teach accounting are a big part of the challenge.
When we look at a college or university hotel management program, it invariably has an accounting for hospitality management course or a course by a similar name. Look inside these courses and you are likely to find all kinds of accounting stuff, from T accounts to trial balances to general ledgers, financial analysis, problem solving, cash flows, balance sheets and profit and loss statements. All of this is OK for a finance major but why are we teaching this to our hotel management students? Repeatedly I have heard from colleagues over the years just how much they hated accounting in hotel school. Over and over again I hear from leaders just how little they learned. Recently, I am hearing from schools too. They tell me just how poor the comments and ratings are for their hotel accounting courses.
I remember just how confused and frustrated I was in both first and second year accounting when I attended hotel school. I do not think I learned one thing, at least I cannot remember if I did. It was always too far out there, too mumbo jumbo and, "Why are they doing this to me?" Accounting was like this water torture test we all had to endure—just get through it was our mantra.
Well, no wonder no one likes the courses and it is not a surprise that they all complain. What gets taught in hotel school is exactly the wrong thing.
Let me digress a little
I remember when I was taking Certified Management Accounting courses many moons ago. We had a law course. Business Law I believe it was called. And guess what? They did not have us prepare a case or defend a client. They did not even have us prepare any summations. They did not have us definitively answer any questions. What they did teach us were some principles and concepts that were in line with where we were at in relation to our other learning. It was not over our heads and when we were finished I had some basic understanding of business law concepts and still do today.
When I cross the hall to the hospitality accounting class, the professors were trying to create mini accountants and this is the wrong approach. Do we honestly think that any more than .001 percent of these hospitality students will ever pursue a career in hotel accounting? If they did—like I did—they would need a rather lengthy list of other classes, courses, training, and experience.
Young hotel students today will find their way into the industry and like most of us they will land in operations and a few short years later they will be a junior somebody in an operating department. Once this happens we throw schedules, purchase orders and whatever else we can find to throw at them. If they survive this we give them the forecast, budget, and commentary, not to mention all the other "special projects" or, as the job description states, all other duties as assigned. What our leaders need from school is a basic understanding of the business of hotels. What makes them tick financially and operationally—not finance and accounting courses.
What students need are Financial Leadership Skills
Schools, please teach them the fundamental accounting equation, explore the basic accounting principles and then turn them on full speed to the business of hotels:
- Instruct them how to read and understand a hotel profit and loss statement and what constitutes a good one.
- Teach them about rooms market segmentation and what it all means for profitability and diversification.
- Baptize them in the world of food and beverage and why we produce statements for our outlets the way we do.
- Explore banquets and the engine of hotel F&B profit.
- Introduce them to the Uniform System of Accounts for the Lodging Industry (11th Edition) and why our entire industry uses this book.
- Stop along the way to examine real hotel ratios that people watch and the expense dictionary.
- Walk them through operating departments vs. non-operating departments.
- Tutor them in understanding RevPAR and STR dynamics.
- Turn them on to basic management and franchise agreement details.
- Delve into flow thru and labor productivity analysis.
- Expose them to EFTEs.
- Show them how to do a zero-based expense budget and forecast.
- Make them create a staffing guide where they differentiate between fixed and variable payroll.
- Critique real property commentaries and show them what owners are looking for.
- Introduce them to a Return on Investment model and CAP rates.
I could fill the page with what they want to know and what would be really useful. But please stop trying to make them into mini accountants. This is entirely the wrong approach and a waste of time and energy. Let's start turning out students who have hospitality financial leadership skills!
There is so much hotel business thinking that is crying out to be taught.
Equip the leaders of tomorrow with industry business-savvy concepts and experiences.
They will love it, they will remember it and—most importantly—when they are thrown to the lions they will have skills to fall back on.
Try running your trial balance simulation when someone asks for next month's forecast. Good luck!
The Hotel Financial Coach