Cornell Hospitality Quarterly

Monte Carlo simulation refers to a computer spreadsheet model that can generate answers to "what if" scenarios involving multiple variables (i.e., a manager's possible decisions). The possible outcomes of a decision are recalculated repeatedly, each time using different randomly selected values of "inputs," where the inputs represent the managers' options. Using a hypothetical case study, this article shows how Monte Carlo simulations are applied in four steps. First, define the problem and build the exact relationship between the input and output variables into a computer spreadsheet. Second, identify input variables that are uncertain but crucial and model them as probability distributions. Third, have the computer generate a wide range of possible outcomes, their probabilities, and related trends. Fourth, based on the simulation results and outcome probabilities obtained in the third step, choose the preferred course of action.

A 1995 survey of over 80 general managers of fourand five-star hotels found little growth in base salary compared to a similar survey conducted three years earlier. The responding managers reported a mean annual base salary of $111,000, although average bonuses added another 25 percent to that amount. Well-educated, it took the majority of respondents six to fifteen years to achieve the GM's position. Along the way, half of the responding GMs had relocated between five and ten times. Some of the GMs were ready to leave their jobs, usually for greater opportunity and better pay and benefits, particularly equity or a retirement plan. The most frequent complaint by unhappy GMs is that they are treated poorly by owners or upper management. The GMs are motivated by the prospects of being rewarded for their work through bonuses, but those who are satisfied with their jobs also enjoy being respected and valued as managers.

Because every market is different, evaluating a general manager's performance is complex. By controlling for market differences with a linear programming model, a chain can develop benchmarks for a group of similar hotels and score the hotel managers' levels of efficiency. Using such scores one can identify the practices of the most efficient general managers and then share that information with other GMs. By comparing each manager's use of resources with that of a peer group of managers (similar environment, similar revenues, similar services), an objective benchmark for resources consumed can be determined for each general manager. That efficiency score is the ratio of resources consumed to the actual expenditures. Using the input factors a composite "general manager" is derived as a target for a particular GM.

Asset management came to prominence in the late 1980s when ownership of a hotel became too complex for many owners and when it became clear to some owners that management companies were not responsible for the long-term appreciation of the property. In essence, the asset manager has the responsibility of seeing that the owner's investment goals are met in terms of cash flow and appreciation of the asset. This study examines the asset-management function from the point of view of owners, operators, and the asset managers themselves. The key to a successful relationship among the owner, operator, and asset manager appears to be open communication, trust, and a mutual understanding of each party's goals.

Congress revised federal bankruptcy law to include room revenues specifically as part of the lender's interest in a hotel bankruptcy. Before this change in the statute, the status of that cash flow was not clear. Part of the confusion stems from a provision in the bankruptcy code that excludes from the lender's interest any property acquired by a debtor after a bankruptcy filing, which seems to include hotel room revenues. In a 1994 law Congress made it clear that room revenues would not be so excluded. Certain court rulings, however, have muddied this attempt at clarity. An Ohio case distinguishes between room revenues and the operating company's remittances to the hotel owner. The court viewed the management contract in that case as an agreement between two principals (the owner and the operator) rather than an agency agreement-thereby distinguishing contract remittances from room revenues. In a Pennsylvania case the court commented (but did not rule) that lenders would not have the code's protection if their loan documents merely referred to "rents."

A survey of 403 U.S. bed-and-breakfast inns in 46 states found that financial returns for large operations were generally better than those of small as B&Bs. Besides asking typical demographic-data questions, the questionnaire focused on topics such as market mix and sources of business; occupancy rate and room rates; the innkeeper's previous hospitalitybusiness experience; and the methods of entry to the business, project development, loan structure, and profit-and-loss statements. The data show that net operating income, return on total assets, and return on equity for larger operations (nine or more rooms) are favorable, compared with smaller operations, indicating significant economies of scale in the B&B industry. Large operations not only captured a greater market share than did small inns, but also achieved higher operating efficiencies. The survey data suggest that the superior performance of the larger B&Bs may be attributable to their lower investment per unit, the operators' higher levels of previous hospitality experience, their greater marketing resources, and access to more-attractive financing arrangements.

A survey of managers at 550 U.S. hotels in all market segments found that managers of large hotels generally appreciate technology more than those in small hotels. Part of the reason for that finding may be simply that large hotels have more technology than small hotels and that it's hard to appreciate technology if you don't have it. Compared to small-hotel operators, managers of large hotels generally saw a greater need for technology in their operations. The front office is the area that would benefit most from a technology update, in the view of these managers, and the chief reason they see for installing more equipment is to improve guest satisfaction. Ironically, many of the managers believed guests did not make the best possible use of guest-room technology, but once again those managers generally had less guest-room equipment for guests to use. Perhaps the biggest difficulty in implementing any technological system is staff training. Due to turnover and the press of business, workers often are left to pick up the basics of system operation on their own.

Part-time workers permit flexible scheduling and traditionally have been relatively inexpensive to employ, but these workers tend to have high turnover rates, which can erode any savings. They may quit their jobs because they feel unappreciated or because they do not receive adequate training, which is often the result of managers' thinking that part-time workers are somehow inferior to full-time workers. But this study shows that critical work attitudes and behavior were as strongly exhibited by part-time workers as by full-time workers, including such measures as competence, work ethic, attendance, and acceptance of organizational standards and values. The food-service industry should therefore try to retain part-time employees by offering enhanced compensation packages, providing adequate training, establishing clear communication channels, allowing access to different jobs and responsibilities, and offering employment benefits.

Under the theory of negligent hiring, even when employees are off duty the employer may be liable for their behavior if the employer knew or should have known that the employee was likely to behave in a certain manner (e.g., the employee has a record of violent behavior) and there is some connection between the wrongful act and the job. Employers must use reasonable care in the selection of employees (especially those with frequent guest contact), including conducting some type of background check to determine applicants' suitability for particular positions. This also applies when transferring an employee from a low-guest-contact position to a high-contact position. The appropriate extent of a pre-hiring investigation depends on the position. The employer should maintain a file that documents the results and sources of reference checks. If an employer is found liable under the theory of negligent hiring, punitive as well as compensatory damages may be awarded.

After more than 20 years of terrorism, commonly known as the "troubles," factions in Northern Ireland called a truce in mid-1994. Tourists responded immediately by stepping up their level of visitation to this province of the United Kingdom. While the Northern Ireland Tourist Board is optimistic that tourism numbers will continue to grow as long as the ceasefire holds, the province is not ready for large numbers of tourists. Not only is the room supply modest, but service standards are less than world class. Nevertheless, there appears to be considerable opportunity to open more rooms in Northern Ireland, particularly in Belfast. The author's personal tour of Northern Ireland revealed a charming destination that is much more tourist friendly now than it was when it faced sectarian strife.

Northern Ireland's tourism officials face the considerable task of building the province's tourism business. Officials have conducted studies and begun policies to improve both the province's attractiveness and its guest accommodations. Although they are separate countries, the north and south of Ireland will be marketed as one destination. While a number of operators plan to invest in accommodations in Northern Ireland, the province's long-term success rides on a permanent settlement to the "troubles," but there is no prospect of an early agreement.