Course Code: FINN 901 Scheduled for semester: One Prerequisite/s: Nil Credit hours: 3 Co-requisite/s: Nil Nominal Contact Hours: 36

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1 Programme: MSc in International Hospitality Management Course Title: HOTEL ASSET MANAGEMENT Course Code: FINN 901 Scheduled for semester: One Prerequisite/s: Nil Credit hours: 3 Co-requisite/s: Nil Nominal Contact Hours: 36 Hours Breakdown: Lectures, Tut/Sem 36 Directed Learning 20 Self Managed Learning, Project/s & Assignment/s 62 Formally Assessed 4 Total Course hours: 120 Lecturer/s: Duncan Gibson Tel Ext: 5123 Lecturer s address Duncan.Gibson@emiratesacademy.edu Course Rationale and Description: It is the responsibility of the financial executive in a firm to identify the form of management of the physical assets of the firm that maximizes value to the owners of that firm. In the specialized firm that is the international (systemized) hotel, if the objective is to maximize the owners value, a clear choice in today s business environment exists between the owners, with or without a franchise operating the hotel themselves or engaging a management contractor. Options in respect of the form of management of the hotel (asset) need to be presented to the suppliers of finance when wishing to acquire a hotel. This course will enable future corporate managers to understand the decisions that owners need to take based upon their view of hotels as assets and the financial implications of the various forms of managing these assets under normal commercial operating circumstances. Teaching and Learning Philosophy: An active learning approach will be implemented through the sessions. A self directed learning model will be used in this course. Students will be responsible for their own learning about the course content; in this case, the concepts and techniques underpinning the practice of effective asset management. The course will be delivered using lectures to illustrate the concepts and techniques for evaluating the most effective form of asset management. 1

2 Contribution to Graduate Profile: 1. Students will have acquired knowledge in understanding the role of asset management in maximizing value for owners in the international hotel industry. 2. Students will have acquired knowledge and skills in understanding the concepts and technical financial processes that underpin the evaluation of options for managing international hotel assets. 3. Students will have acquired skills in investigating and forming an opinion as to the appropriateness of management contracting as an asset management strategy. Specific Learning Outcomes: Knowledge Upon completion of the course, students will know how to: Skills LO 1. Demonstrate the ability to assess the financial feasibility of hospitality operations through the application of financial concepts. LO 2. Demonstrate the application of technical financial processes that underpin the evaluation of options for managing hotel assets. LO 3. Explain concisely the concepts and financial techniques underpinning the decisions on managing a hotel s assets. LO 4. Demonstrate an understanding of management contracting as an appropriate hotel asset management strategy. Upon completion of the course, students will be able to demonstrate: LO 1. the ability to assess the financial feasibility of hospitality operations through the application of financial concepts. LO 2. the application of technical financial processes that underpin the evaluation of options for managing hotel assets. LO 3. the ability to explain concisely the concepts and financial techniques underpinning the decisions on managing a hotel s assets. 2

3 LO 4. diligence in carrying out the necessary reading to understand the appropriateness of management contracting as a hotel asset management strategy. Autonomy and Responsibility Competence Upon completion of this course, students will be able to state the following reporting, regulating or ethical considerations: LO 1. The fair and accurate creation of financial accounting data for decision making. LO 2. Creating justifiable business decisions in respect of managing assets at the level of the hotel enterprise on financial management principles. Self-Development Competence Upon completion of this course, students will be able to demonstrate the need to continually research and update the following areas: LO 1. The format of financial statements for analyzing a hotel s performance. LO 2. Be aware of financial management accounting processes used in decision making on managing hotel assets. Role in Context Competence Upon completion of this course, students will be able to effectively contribute to the following activities or endeavours: LO 1. The creation and understanding of Financial Statements as they relate to decision making on managing hotel assets. LO 2. The format of financial statements for decisions on managing assets. Transferable and Employment Skills SKILLS PRACTICED TAUGHT ASSESSED 1. Written Communication X X X 2. Verbal Communication 3. Commercial Awareness X X X 4. Problem Solving X X X 5. Networking 3

4 6. Planning and Organising X X X 7. Numeracy X X X 8. Computer Literacy 9. Time Management X X 10. Research (Directed Reading) X X 11. Team Work 12. Leadership 13. Negotiating 14. Customer Service Indicative Content: 36 hours (taught component) Topic No Hours Topic 1 12 Concepts of financial feasibility Cost of Capital Estimating Net Income and Cash Flow Project Appraisal 2 6 EBITDA Operating Profits Stabilized Year 3 6 Valuation (Income Method) 4 12 Asset Management Options (Owner Operated - Management Contracts - Branded Operations Franchised) Total Hours 36 4

5 ASSESSMENT Your final grade will be on the basis of your performance on the following evaluations (all assessments are individual). Assessment Learning Outcome(s) Dates Duration Format (content) Weight % Financial Techniques 1-2 Last session in third week of the course 3 hrs (approx) In-class - Calculations ( open book ) 40% Management Contracting as an Asset Management Strategy 4 Second session in last week of the course 1-2 hrs In Class - Short Answer ( open book ) 25% End of course 2-3 Last session of the course 1-2 hrs In- Class - Short Answer ( closed book ) 35% Grading Letter Grade Grade Points Percentage Grade Grade Description Grading Rubric A Distinction B Merit The student s work is of an excellent standard. It meets, with only slight non conceptual errors, the subject learning outcomes. The student s work is good. It largely meets, with very few conceptual errors, the subject learning outcomes. 5

6 B Pass The student s work is wholly satisfactory. It meets, with some conceptual error, the subject learning outcomes. F 0.00 Less than 70 Academic Integrity Fail The student s work is inadequate. It fails, with a lack of understanding of sufficient of the basic concepts, to meet the subject learning outcomes. Each student in this course is expected to abide by the Academy s Code of Academic Integrity. Behavioural expectations are comparable with post-graduate students at universities around the world. However, should it become necessary, the lecturer reserves the right, at any time, to implement such measures as to ensure the smooth running of the course. Instructional Materials and Resource Required texts: Denton G., Raleigh, L.E.,& Singh A, J., (Eds.)(2009) Hotel Asset Management: Principles and Practices. (2 nd Ed) Lansing Mi: Educational Institute, American Hotel &Lodging Association. Rushmore,S. (2012) Hotel Market Analysis and Valuation. Appraisal Institute, Chicago, Illinois. Directed Extra Reading To be advised at the appropriate time during the course. Course Materials Materials forming the basis of the class inputs (ie. power-point slides and handouts) will be uploaded on to the Moodle network after the class. Students absent from class need to link these inputs into a coherent whole themselves. Correspondence with the lecturer will be through the student s personal , not via Moodle. 6

7 Tentative Course Schedule (taught component 36 hours) (May change to accommodate student progress) Teach Wk. Topic Indicative Content 1 -Session 1 Introduction Syllabus - Financing Decision General Introduction to Financial Feasibility studies. 1-Session 2 EBITDA Uniform System of Accounting for the Lodging Industry (USALI) Concept of the Stabilized Year 1-Session 3 Valuation Income Method of Valuation Capitalization Rates 2-Session 1 Asset Management Options Owner Operated - Management Contracts - Branded Operations Franchised 2-Session 2 Concepts of Financial Feasibility Cost of Capital - Estimates of Net Income and Cash Flow 2-Session 3 Concepts of Financial Feasibility Estimates of Net Income and Cash Flow (Cont) 3-Session 1 Concepts of Financial Feasibility Project Appraisal 3-Session 2 Review Feasibility Illustration of complete example. 3-Session 3 Assessment Financial Techniques 4-Session 1 Feedback of assessment on Financial techniques Review of assessment on Financial techniques and distribution of Question bank for Short Answer - End of Course assessment. 4-Session 2 Assessment Management Contracting as an Asset Management Strategy 4-Session 3 Assessment End of Course 7

8 TERMINOLGY EXPLAINED An International (systemized) hotel The definition used here assumes a full-service hotel that controls operating performance through a system of Responsibility Accounting. A hotel must be systemized for a Responsibility Accounting system to exist. Systems need to contain job categories and job descriptions, operating manuals (SOPS); forms and reports; and authority/responsibility relationships defined. Thus a minimum size of hotel of 100 rooms is generally regarded as needed to sustain such systems. Normal Commercial Operating Circumstances Assumption that the operational objective is to maximize monetary outcomes from the hotel s operations, that alone are going to determine the survival of the firm. Assumption following from the above that the hotel stands alone. It is not dependant or ancillary to other activities carried out by the owner(s). Assumption that, owing to the necessity to pay corporation tax with the attendant government incentives to minimize tax liability, that loans are necessary for the existence of the hotel, given according to some objective criteria, by properly regulated lending institutions. Assumption, following from the above, that the hotel, and the society in which the operations of the hotel are carried out, are always legitimate (meaning in accordance with the law or generally accepted rules governing that society) Assumption that an open and free business operating environment exists where the hotel is located. END 8