You are on page 1of 14

www.palgrave-journals.

com/thr

Performance measurement in small motels


in Australia
(Funded by the Sustainable Tourism Co-operative Research Centre)

Suzanne Bergin-Seers* and Leo Jago


Received (in revised form): 6th June, 2006

*Centre for Hospitality and Tourism Research, Victoria University, PO Box 14428, Victoria 8001, Australia
Tel: + 61 3 9919 4911; Fax: + 61 3 9919 5278; E-mails: sue.bergin@vu.edu.au, leo.jago@vu.edu.au

Suzanne Bergin-Seers is a research fellow process include the ability to identify key perform-
with the Centre for Hospitality and Tourism ance indicators to track results as well as an
Research of Victoria University. Her research understanding of the most suitable measures to
focus is small business with a specific focus on use. Specifically, the study focuses on identifying
small tourism enterprises. Her areas of exper- the key constructs of performance for small firms
tise include quality management, business that include the key components of drivers and
performance and benchmarking. results. The specific monitoring and measurement
activities of small motel owner-operators were
Leo Jago is a professor with the Centre for identified using a case research approach. The
Hospitality and Tourism Research of Victoria findings of the study indicate that those owner-
University. He has eclectic research interests managers who operate successful motels employ a
that cover event evaluation, small tourism balanced approach to performance measurement by
enterprise management, tourism marketing, utilising a small number of key measures to
tourism planning and volunteer management. monitor results and to review management activ-
For nearly 20 years, he owned and operated ities.
motels and restaurants around Australia and Tourism and Hospitality Research (2007) 7, 144–155.
has a detailed understanding of the needs of doi:10.1057/palgrave.thr.6050036
small operators in the tourism industry.
INTRODUCTION
ABSTRACT Business performance measurement has been
KEYWORDS: performance measurement, viewed as a challenging task, particularly for
small tourism enterprises, small motels, small firms. Essentially, the difficulties relate to
performance management defining key performance dimensions (Hudson
et al., 2001; Garengo et al., 2005). Over the
This research explores the measurement of years extensive research of business perform-
performance in small motels. There are many ance measurement in large firms has been
challenges facing business performance manage- undertaken and only recently has a greater
ment in small firms. Most of these challenges are focus been given to small enterprises. Although
due to resource shortages, lack of functional exper- there is evidence to suggest that the key dimen-
tise and environmental instability. Of major sions of performance are similar for large and
importance to firm survival is the small enterprise small firms the role of management varies
owner-manager’s ability to monitor the operations (Haber and Reichel, 2005). The differences in
performance. Key components of the monitoring the way small firms are managed are largely

144 Tourism and Hospitality Research Vol. 7, 2, 144–155 © 2007 Palgrave Macmillan Ltd. 1467-3584 $30.00
Bergin-Seers and Jago

due to the structural and resource variations, as and by the mid-1960s the number increased to
well as the motivations of the owner-manager 700 (Richardson, 1999). The growth rate has
for establishing the small business (Peacock, slowed since that time with the total number
1999). These differences can impact on the way of motels being around 2,300 (Australian
performance is measured. Bureau of Statistics, 2001). Over time a number
of associations and chains emerged to provide
BACKGROUND a common brand and marketing system. These
Small tourism enterprises (STEs), which are chains included Motels of Australia Limited,
defined as firms employing less than 20 workers, Homestead Motor Inns (to be later affiliated
represent 91 per cent of businesses in tourism- with Best Western International), Flag Motels
related industries in Australia (Bolin and Green- (rebranded to Choice Hotel) and the Budget
wood, 2003). Their importance in terms of Motels (Richardson, 1999).
economic contribution and employment is The value of motels to the accommodation
widely recognised by both government and sector was a key driver of a project titled —
various industry bodies (Department of Industry ‘Performance Measurement in Small Motels’. The
Science and Tourism, 2002), yet there is scant study was undertaken in 2004–2005 in Australia
information about what drives good perform- to explore management activities and behav-
ance and how performance is measured. This iours and was funded by the Sustainable
lack of research is a concern because STEs have Tourism Co-operative Research Centre
higher exit rates than are found in most other (STCRC). As motels in Australia can vary from
industries (Department of Industry Science and the very small boutique-type premises to the
Tourism, 2002). STEs operate across a diverse large enterprises that have over 50 rooms, issues
range of tourism-related industries including regarding performance management were
accommodation, transport, attractions and varied. In order to more clearly capture the
hospitality. Given the view that performance is dimensions of performance for one particular
affected by the industry in which the enterprise type of motel, this study explored small motels
operates (Porter, 1991), it was considered essen- having between 15 and 35 rooms.
tial to narrow the study to one sector in order
to capture the specific performance-related AIM OF THE STUDY
dimensions. Therefore, this study considered The aim of this study was to better understand
the accommodation sector with a specific focus performance measurement in relation to small
on small motels. firms and specifically small motels. It was
Motels first emerged in Australia as a result deemed that an examination of the perform-
of the increasing popularity of the motor-car, ance measurement activities of owner-managers
which created a demand for accommodation of high performing firms would help to better
by those able to travel extensively due to the understand good performance management.
independence the car provided.The first motels Specifically, the research gathered data about
were small and averaged around 25 rooms.They the key performance measures used to track
were usually owned by a husband and wife the outcomes of high performing small
team and were situated along various highways motels.
(Richardson, 1999). According to Richardson
(1999), the term ‘motel’ is based on its link to A CRITICAL REVIEW OF
the drive market and was an abbreviation of PERFORMANCE MEASUREMENT
Motor-Hotel. Since the first motel opened in The performance outcomes of an organisation
Australia in 1949 the number of these establish- cannot be determined without some kind of
ments has increased rapidly. At the end of the measurement activity. Performance measure-
1950s there was a total of 80 motels in Australia ment is defined by Neely et al., (1995) as ‘the

© 2007 Palgrave Macmillan Ltd. 1467-3584 $30.00 Vol. 7, 2, 144–155 Tourism and Hospitality Research 145
Performance measurement in small motels in Australia

process of quantifying the efficiency and effec- These measures alone are, however, no longer
tiveness of action’ (p. 80), whereas a perform- relevant for today’s managers. To remain
ance measure is the metric used in the competitive, firms now need to consider non-
measurement process. In early studies of financial aspects, such as quality, flexibility and
performance, results were discussed and meas- the implementation of new technologies. The
ured largely by the firm’s financial outcomes; limitations in using only financial measures of
however, in the last 25 years there has been a performance are that ‘they are lagged indicators
revolution in performance management and which are the result of management action and
measurement (Neely and Bourne, 2000). Meas- organisational performance and not the cause
urement approaches that relied solely on finan- of it’ (Brignall and Ballantine, 1996: 6). The
cial results are now being replaced by more differences between traditional and non-tradi-
integrated systems that combine financial and tional measures are shown in Table 1.
non-financial results. The importance of non-financial measures
emerged as it was acknowledged that the tradi-
Balance between financial and tional performance measures could not provide
non-financial measures information for the development of strategy. It
Financial measures have been the traditional became apparent that improvement efforts
means of performance measurement. Business cannot be quantified in dollar terms particu-
performance systems historically developed as larly if they relate to customer satisfaction and
a means of monitoring and maintaining organ- product or service quality (Ghalayini and
isational control. As already mentioned, business Noble, 1996). The non-financial or operational
performance measurement in the past focused results are measured by product and service
on the attainment of a set number of key finan- output. These results are explained via terms
cial and accounting measures. These measures such as quality, quantity, volume, time, ease of
focused on financial data, such as return on use and money (cost, price and value).
investment, return on sales, price variances, sales Both financial and non-financial results can
per employee, productivity and profit per unit be identified via both external and internal
of production (Ghalayini and Noble, 1996). measures. The role of the stakeholders in

Table 1: A comparison between traditional and non-traditional performance measures

Traditional performance measures Non-traditional performance measures

Based on outdated traditional accounting systems Based on company strategy


Mainly financial measures Mainly non-financial measures
Intended for middle and high managers Intended for all employees
Lagging metrics (weekly or monthly) On-time metrics (hourly, or daily)
Difficult, confusing and misleading Simple, accurate and easy to use
Lead to employee frustration Lead to employee satisfaction
Neglected at the shopfloor Frequently used at the shopfloor
Have a fixed format Have no fixed format (depends on needs)
Do not vary between locations Vary between locations
Do not change over time Change over time as the need change
Intended mainly for monitoring performance Intended to improve performance
Not applicable for JIT, TQM, CIM, FMS, RPR, OPT, etc Applicable
Hinders continuous improvement Help in achieving continuous improvement

Source: Ghalayini and Noble (1996).

146 Tourism and Hospitality Research Vol. 7, 2, 144–155 © 2007 Palgrave Macmillan Ltd. 1467-3584 $30.00
Bergin-Seers and Jago

providing measurement data is important. key outcomes of a business need to balance


Internal measures relate to employees and stakeholder satisfaction with the needs of the busi-
customers. Key customer measures may include ness, as satisfaction alone may not provide
— number of existing customers versus number sustainable outcomes. An example of how the
of new customers; number of bookings per input–output model is used to illustrate
enquiry or number of complaints. Employee management of the goal of ‘repeat business’ is
measures may study staff attitude, feedback and presented in Figure 1.
turnover. External measures refer to data gath- Although it is the inputs (or business drivers)
ered from external sources/stakeholders. Exam- and how they are managed that determine
ples of these measures include market share stakeholder satisfaction it is also the value that
relative to competitors, and own prices and key stakeholders bring to the business. For
products compared to competitors’ prices and example, having satisfied employees may not
product ranges. Mechanisms for these measures necessarily provide the business with the
include internal and industry reports, compu- needed skills and knowledge. It is therefore the
terised booking systems, surveys and bench- satisfaction levels of the employees, customers
marking resources. and society together with the satisfaction of the
Finally, it is important to understand that as business’s needs and wants that drive the busi-
strategy varies from firm to firm the most ness results. Overall, it is the measure and attain-
appropriate type of measures will also vary. As ment of both the business’s wants and needs
suggested by Haber and Reichel (2005), a firm and the stakeholders wants and needs that indi-
with investor input may be more focused on cate the success of the business at any one point
financial measures to evaluate business perform- in time. Consequently, with ongoing review of
ance whereas the specific and most often the outputs and outcomes (via their related
personal goals of the lifestyle family-owned measures) managers can determine if the
businesses may place greater emphasis on non- attainment of the set goal is sustainable and
financial measures, including employee and whether the core organisational strategies are
owner satisfaction. appropriate.
Although the input–output model helps
Results and measures explain the performance process in a very
In studying business performance measurement simple linear way, researchers in this area know
it is essential to identify the key dimensions to that the interactions between inputs and outputs
be measured. Although a number of models are much more complex.This study was under-
exist for large business which are aimed at iden- taken in order to better understand the dimen-
tifying these key dimensions, many are too sions of performance measurement in small
complex for small firms (Neely et al., 1995; motels.
Kaplan and Norton, 2001; Neely et al., 2001).
Brown (1996) described the process of perform- RESEARCH APPROACH
ance management using an input–output In order to capture the elements of perform-
model. The performance results in this model ance measurement in small motels a two-staged
were represented by outputs, outcomes and goals. approach was employed. In the first stage, in-
The outputs are the products and services of the depth interviews were conducted with an
business, whereas outcomes are stakeholder satis- Expert Reference Panel to refine the researchers’
faction. The main goals of an enterprise may understanding of the performance measure-
vary from firm to firm but in most cases they ment activities of small motels. The subsequent
are usually the bottom-line results such as refinement process considered constructs in
revenue, profit and Return on Investment relation to ‘meaning’ and ‘terminology’, as used
(ROI). According to Neely et al. (2001), the by experts in the small business and hospitality

© 2007 Palgrave Macmillan Ltd. 1467-3584 $30.00 Vol. 7, 2, 144–155 Tourism and Hospitality Research 147
Performance measurement in small motels in Australia

INPUTS PROCESSING OUTPUTS OUTCOMES GOAL


SYSTEM

- Skilled - Design of
motivated, product &
- Products - Delighted
employees services
- Services customers
- Customer - Production of Repeat business
- Financial - Customers’
requirement products
results needs met
- Raw materials - Delivery of
- Capital service

Input measures Process Output Outcome


measures measures measures
Source: Brown, 1996.

Figure 1 Inputs, processes, outputs and outcomes. Source: Brown, 1996

field. Furthermore, the refinement process researchers to confirm, reject or modify details
sought to identify the attributes within each gathered from the expert panel about the meas-
construct as understood and/or applied by urement practices employed by operators for
experts in the fields. The gathering of data was monitoring and improving performance.
given further context by limiting the discussion
to small motels as identified in this paper. Profiles of the small motel operators
The expert reference panel comprised eight Of the seven operators interviewed, two were
domain experts who were drawn from motel located in metropolitan Melbourne and five in
and hotel industry organisations; tourism regional Victoria.The motels fit the small motel
government agencies; small motel operators; definition, as described earlier. A profile of the
academia; tourism consultancies and accounting motels is set out in Table 2.
and financial services In viewing the profiles it is apparent that the
After the interviews with the experts, case larger of the small motels have greater numbers
research was undertaken. As this research was of casual staff as opposed to full-time staff. The
interested in the activities and behaviours of operators indicated that this arrangement gives
small motel owner-operators the selection of them more flexibility in rostering during low
case firms managed by operators considered to and peak periods. There is also a range of busi-
be exemplary was important. To assist in this ness structures. Three of the motels are owned
process AAATourism provided advice and by the families operating them, four are leased
details of operators they believed to be and one is managed for the owners. Addition-
commendable. Advice regarding this phase of ally, affiliations with marketing groups or chains
the research was sought from AAATourism as vary across the motels. Although not shown in
they are the national tourism body responsible the table, information was also gathered from
for managing the star-rating scheme for accom- the owner-managers about the strategy they
modation and who have an intimate knowl- employed in operating their motel. Strategy in
edge of the operators and their products. In this research refers to the overall mission and
seeking referrals from AAATourism, it was also goal for the business as a guide to how managers
requested that the operators needed for this utilises their resources and capabilities and how
research currently manage small enterprises they control and direct the way the business
that generally meet the characteristics as set out utilises changes in the environment for compet-
in the definition. As a result the contact details itive advantage (Porter, 1991; Pelham, 1999).
of a total of ten small motels were provided to The strategies employed will be discussed in
the researcher and seven interviews were the following section. It is interesting to note
undertaken. The case studies enabled the that each of the owner-mangers operated their

148 Tourism and Hospitality Research Vol. 7, 2, 144–155 © 2007 Palgrave Macmillan Ltd. 1467-3584 $30.00
Bergin-Seers and Jago

Table 2: Profile of the operators

Motel Size (no. #No. of staff Star-rating Location Affiliation Ownership


of units)
FT Casual

1 14 1 — 3½–4 Centre of Budget Owned and managed


regional town by husband and wife
2 20 5 — 4 Outskirts of Best Western Leased and managed
regional city by husband and wife
3 24 2 3 3 Metropolitan None Owned and managed
by family
4 28 61 122 4½ Outskirts of Best Western Owned and managed
regional city by family
5 30 5 10 4½ Metropolitan Golden Chain Leased and managed
by husband and wife
6 34 4 11 4 Outskirts of Comfort Inn Leased and managed
regional city by husband and wife
7 35 4+1 PT 17 4½ Outskirts of Comfort Inn Managed for owners
regional town
1
All employed for the restaurant.
2
Six employed for the restaurant and six for the motel.

motel with the aim of achieving not only documented, the experts generally agreed that
personal satisfaction but also profitable results. those viewed as ‘good operators’ would use
The desire for most of the operators to be their both financial and non-financial results as indi-
own boss and to work to achieve success were cators of the motel’s performance. The key
key motivators for going into the business and measures, as listed within each of the three
will be considered in the discussion as a factor results categories in Table 3 are ways for owner-
influencing the way in which the operations managers to gather information needed to
were managed. review the firm’s practices. Although the
language used by the experts was not the same
DISCUSSION OF THE FINDINGS as that used in the literature, their views on the
After the interviews with the experts their key components of performance results in small
responses were transcribed and coded for anal- motels were able to be classified by the catego-
ysis. Although the interviews were largely ries of outputs, outcomes and goals.
exploratory they were guided by the analysis According to the experts, within the outputs
of existing performance measurement models, category the most likely used financial meas-
as discussed.The analysis explored the data with ures would include gross revenue, gross sales,
a specific focus on providing answers for the average room rate and RevPAR (revenue per
set objectives relating to the identification of average room rate). The measures of repeat
the key performance constructs of the driver customers, new customers, occupancy rate, star-
and result dimensions in small motels. rating assessments and customer feedback were
seen to be good measures of the non-financial
Identifying the key measures aspects of the product and service.
Although the specific performance activities of In the outcomes results category the experts
small motel owner-managers are not widely generally believed that stakeholder satisfaction

© 2007 Palgrave Macmillan Ltd. 1467-3584 $30.00 Vol. 7, 2, 144–155 Tourism and Hospitality Research 149
Performance measurement in small motels in Australia

Table 3: The results measures used in small motel

Results Measures important to small motels

Financial results Measures:


(outputs) Gross revenue
Gross sales (room and F&B)
Average room rate
Revenue per average room rate (RevPAR)

Non-financial Measures:
results(outputs) Occupancy rate
Number of new and repeat customers
Star-rating assessment reports

Stakeholder STAKEHOLDER BUSINESS satisfaction with:


and business Customer measures Customers (measured by):
satisfaction Repeat customers Yield
(outcomes) New customers Length of stay
Word of Mouth (WOM) referral Frequency of stay
Positive feedback
REVPAR trend

Employee measures Employees (measured by)


Positive feedback Skill and knowledge provided
Absenteeism Efficiency levels
Flexibility in terms of work hours and roles Accuracy levels
required Customer service
WOM referral

Investor or financier measures Investor or financier (measured by)


Positive feedback Financing suitability
Preparedness to make further investment/loans Financing requirements

Community measures Community (measured by)


Positive feedback Support provided
Referral Value of alliances
Willingness to form alliances

Business results Net profit


(goals) ROI

was not sufficient on its own to ensure the that both employee and customer satisfaction
business goals were achieved.Two of the experts is important as long as in achieving this aim
strongly believed that the stakeholders (partic- the firm achieves the financial results desired.
ularly the employees and customers) should As shown in Table 4, a range of measures were
also provide benefits to the business and that seen to be appropriate for measuring stake-
the relationship between the firm and these holder and business satisfaction. It is interesting
stakeholders should be reciprocal. This means to note that most of these measures are non-

150 Tourism and Hospitality Research Vol. 7, 2, 144–155 © 2007 Palgrave Macmillan Ltd. 1467-3584 $30.00
Bergin-Seers and Jago

financial in nature. For example, staff efficiency strategy could mean that the employees and
levels were said to be measured by average time resource (capabilities) and the processes need
to clean a room. to be changed in more radical ways.
Finally, given the small size of the motels the Using the data gathered from the experts the
experts believed that the key business results research issues regarding performance measure-
(or goals) would be limited to profitability and ment in small motels were then explored in
ROI. Although the measures identified by the the case research. The analysis of the case
experts are both limited and simple, knowing research data focused on confirming, rejecting
and using the key measures alone was not or modifying the understanding of small motel
considered enough. It was indicated that good performance measurement with regard to the
owner-managers would review these measures performance measures important to good
on a regular basis in order to monitor and operators of small motels and how these meas-
control management activities. To do this the ures are used to assist the business performance
owner-manager needs to understand various of small motels.
relationships between the financial/non-finan-
cial measures and the drivers (gathered by feed- Confirming the measurement
back) and the business results and stakeholder performance results attributes
satisfaction (understood by feed-forward). With In the case research stage existing motel owner-
feedback from the results (sales and complaints) managers were asked about the most important
the owner-manager has important information, measures used to track performance. These
which isolates the problem to either the proc- responses supported the experts’ views that
esses (in this case booking processes) and/or good operators use both financial and non-
the businesses capabilities (the performance of financial measures. The most commonly cited
office staff and the computer system used).With financial measures included tracking of sales
further review and investigation the specific growth, monitoring of takings, comparisons of
causes should be known. If it is found that the average room rate. Only one owner-manager,
processes or capabilities are not delivering the however, calculated and compared RevPAR
wants and needs of the stakeholders (ie the and only one conducted an analysis of net
corporate clients), then action needs to be profit. It is interesting to note that both of these
taken to address this issue. The action may be operators had formal training in hotel/motel
to train staff or to purchase and install a new management either through work in larger
reservation booking system. Further explora- hotels or via past experience as a hotel fran-
tion of the best training program of computer chisee. In regards to non-financial measures the
software may also be needed. In understanding entire group of owner-managers measured
how the inputs and outputs are linked the occupancy rates. Furthermore, five owner-
owner-manger can better manage the activities managers measured customer satisfaction and
(inputs) for ongoing or improved outcomes. five of the seven also used systems to track and
Additionally, the outputs and outcomes can be collect data on customers. These systems were
used in a feed-forward process where the used to identify customer origins, to record
strategy is reviewed to assess whether it is the guests’ needs and to track new and repeat
most appropriate strategy for delivering the customers. Interestingly, only one of the seven
needs of the corporate clients. The results owner-managers rated employee satisfaction as an
(outputs and outcomes) in this case may indi- important measure. Of note is that the owner-
cate that the strategy needs to be refocused to managers were often not able to overtly differen-
better provide for all the corporate clients’ tiate the financial measures from the non-financial
needs and not just booking and payment issues. measures. Instead the measurement of these
In this example, the implementation of a revised aspects was instinctive and was only identified by

© 2007 Palgrave Macmillan Ltd. 1467-3584 $30.00 Vol. 7, 2, 144–155 Tourism and Hospitality Research 151
Performance measurement in small motels in Australia

the researchers who matched the owner-managers Table 4 highlights a number of key findings.
activities to the terminology. First, all the owner-managers interviewed
When asked to rate the most important monitored performance by using a balance of
measure for the operation of their business the both financial and non-financial measures.
responses varied. Of the seven owner-operators Secondly, among the seven firms common-
studied, three rated a non-financial measure as alities were found in relation to the measures
most important and four rated a financial considered to be essential to monitoring
measure. Of the financial measures two rated performance. These commonalities were shared
sales growth and two rated sales takings as the by the motels with similar strategies. For
most important measure. With regard to non- example, all three firms with a ‘development’
financial measures two rated occupancy rate as strategy rated tracking of sales growth and tracking
the most important measure and one rated of new and repeat customers among their most
customer satisfaction as the key measure of important measures. On the other hand, the
performance. Although these results highlight three motels with a ‘maintenance’ strategy all
the key measurement focus of the owner- listed customer satisfaction (tracking and profiling)
managers they cannot be considered in isola- and average room rate as their most important
tion. As discussed in the following section the measures. Reasons for this difference could be
owner-managers possessed a deeper under- that firms with a ‘development’ strategy were
standing of the interplay of drivers and results more focused on developing the customer base
and how the measures need to be considered by keeping existing customers and seeking new
together. customers, whereas established enterprises
To further understand why various measures already had a customer base and good repeat
were used, comparisons were made of measures business, therefore, keeping existing customers
with business strategy as summarised in Table satisfied was deemed to be critical.
4. Overall, it was found that there were three In terms of frequency of measurement, three
types of strategy employed by the owner- key measures were carried out on a daily basis
managers. The most aggressive strategy identi- by most of the motel owner-managers. Again
fied was one that aimed to increase the number these measures included both financial and
of units (rooms). The strategy for ‘growth’ was non-financial types: — tracking of repeat
to be achieved either by purchase of other customers; monitoring of takings; and tracking
motels or by a major expansion of the property. occupancy rate. Furthermore, analysis of net
The second strategy was one of ‘development’ profit was undertaken by most of the motels on
where the owner-managers were still building a monthly basis and average length of stay was
the business. This strategy related to firms that measured by most firms on a quarterly basis. A
had not reached full potential and the customer significant finding was that comparisons of
base was still growing. For example, an owner- average tariffs with an industry average were
manager had taken over an old motel and rarely, if ever, done. The main reason for this
decided to renovate to attract a different and was the lack of availability of industry data in
more profitable market. This approach aimed general.
to alter the product. The third strategy related
to ‘maintaining’ the business. In this case the How the measures are used to assist
owner-manager’s goals were to keep the busi- the management of small motels
ness operating so as to maintain its perform- Although both the experts and the owner-
ance. Maintenance could mean that either new managers agreed that managing a small motel
markets or ongoing improvements of a minor was not ‘rocket science’, there was a shared view
nature may be needed to ensure the same or that understanding the financial structure of the
better performance was achieved. business was important and not always well

152 Tourism and Hospitality Research Vol. 7, 2, 144–155 © 2007 Palgrave Macmillan Ltd. 1467-3584 $30.00
Bergin-Seers and Jago

Table 4: A summary of the financial and non-financial measures rated as the most impor-
tant by the interviewees

Motel Strategy Financial measures Non-financial measures

A Development Tracking of sales (3) Occupancy rate (1)


(via renovations and upgrade) Monitoring of takings (2) Customer satisfaction
Tracking new and
repeat customers
B Growth (via purchase Tracking sales growth (3) Occupancy rate
of other motels) (by room and yield from F & B) Customer satisfaction (1)
Comparisons of average tariff Employee satisfaction
to the industry
Monitoring of takings (2)
C Development Tracking sales growth (1) Occupancy rate
(via minor upgrades) Tracking customer origins
Tracking of new customers (2)
Customer satisfaction (3)

D Development Tracking sales growth (2) Track the number of repeat


(a newly built motel) Monitoring of takings (1) customers. (3)
Occupancy rate
E Maintenance (with a focus Monitoring of takings (1) Customer satisfaction (3)
on continual amenity and Analysis of net profit (2)
product improvement) Average room rate (3)
F Maintenance (with a focus Average room rate (2) Occupancy rate (1)
on increasing leisure and Revenue per available room Guest profiling and tracking
corporate market share) (RevPAR)
Tracking sales growth (3)
Wages percentages
Food costs
Average cover in restaurant
G Maintenance (with a focus Tracking sales growth (1) Occupancy rate
on improving low season Comparison of average Tracking of repeat customers (3)
occupancy) room rate (2) Customer satisfaction (3)

Note: Bracketed numbers indicate importance ranking by the operators.

grasped. The basic principle of profit, as driven room, together with the non-financial measure
by expenses and revenue, was mentioned by of occupancy rate, are important to yield. This
most owner-managers. Additionally, an under- view is exemplified in the following quote.
standing of the relationship between other
aspects of the business was seen as an impera- ‘I look at room rate and occupancy. People
tive. For example, although occupancy rate is think that occupancy is the be all and
a measure of the health of the business it cannot end all, but it’s not. You can have 100%
be viewed in isolation. Nearly all of the experts occupancy with half rates and make no
mentioned that the average tariffs charged per money, where as you can have half occupancy

© 2007 Palgrave Macmillan Ltd. 1467-3584 $30.00 Vol. 7, 2, 144–155 Tourism and Hospitality Research 153
Performance measurement in small motels in Australia

with full rate and then you’ll make more regard to the use of financial models (ie models
money because you keep your costs down. based on the percentage cost of expenses), the
People look at it different ways. I have always owner-managers suggested that the lack of
been after room rate rather then occupancy’ relevant data made this difficult in reality.
(M5).
‘Industry averages are very hard to obtain. A
There was also a high level of agreement lot of people don’t like giving out informa-
that an understanding of the key measures tion. We tried to do it via the local accom-
required to monitor activities on its own was modation association. I have tried to push
not enough for good management. For instance, that wherever I go but no one’s been keen.
a number of the owner-managers mentioned I couldn’t tell you what our town runs at
the need to regularly review particular (ie occupancy rate) not with any real accu-
aspects of a motel operation via cost and sales racy. You presume a lot. I use ABS data and
analysis to ensure business survival and success. you hope that everyone puts their figures in.
This type of financial analysis largely included They put it in by regional area so that you
very basic measures, as already mentioned don’t get information about your town. I’m
(that is, tracking of takings and sales growth), but not interested in what other motels do in
also needed to consider non-financial aspects. different regions I want to see what each of
my key competitors do [he needs more local
‘You should analyse your takings weekly. information about competitors].’ (E6).
It’s too late if you do it next week. It has
to be done this week….Although it always
comes down to the dollars and cents you are CONCLUSIONS
missing the point if they only do that (that is, The study deals with the identification of
only measure the financials)’ (M2). performance measures and performance meas-
urement activities in small motels. The research
The more advanced financial analysis of room draws on the integrated approach to perform-
profitability or yield by calculating the average ance measurement which encompasses not
cleaning cost per room compared to revenue only the understanding that firms are driven
per average room rate (RevPAR), as suggested by goals and need resources to achieve these
by the experts, was only carried out by those goals but also includes the view that stake-
with experience in larger businesses. Yet, there holders play a key role in an enterprise
was no indication that these operators were any achieving its business goals. This approach
more successful than those without this expe- recognises the multidimensionality of perform-
rience. Additionally, about half of the owner- ance measurement and how it can be used to
managers indicated that any measurement of help manage an enterprise for continuous
results and the overall understanding of the improvement.
business operations was instinctive, as denoted The use of multiple measures suggests that
in the following quotes. owner-managers of small motels recognise the
‘I know what profit I make every week. importance of a balanced approach to perform-
Analysis of net profit is instinctive’ (M5). ance measurement. This balanced approach
‘Most of the measurement I do with regard to entails the gathering and analysis of both finan-
the business I think I do subconsciously’ (M2). cial and non-financial measures. The balance of
measures recognises that business results (outputs
Finally, the importance of benchmarking and outcomes) are affected by non-financial
performance against competitors and industry outputs. In particular, the importance of stake-
averages was seen as important. Despite the holder satisfaction is understood by the better
experts’ views of benchmarking value, with performing owner-managers. Additionally, this

154 Tourism and Hospitality Research Vol. 7, 2, 144–155 © 2007 Palgrave Macmillan Ltd. 1467-3584 $30.00
Bergin-Seers and Jago

study indicates that the types of measures used Brown, M. (1996) ‘Keeping Score: Using the right
by firms appear to be based on the strategy metrics to drive world class performance’,
employed. Quality Resources, New York.
Although operating a small motel is not Department of Industry Science and Tourism. (2002)
‘rocket science’, the study suggests that under- ‘The Ten Year Plan for Tourism’, Common-
wealth of Australia, Canberra, p. 13.
lying the fairly simple and routine practices of
Garengo, P. Biazzo, S. and Bititci, U. (2005) ‘Perform-
the operation an holistic understanding of the ance Measurement Systems in SMEs: A review
interplay between the inputs and the outputs/ for a research agenda’, International Journal of
outcomes is needed for successful business Management Reviews, 7, 1, 25–47.
performance. Also central to achieving the Ghalayini, A. and Noble, J. (1996) ‘The Changing
desired business results is keen monitoring by Basis of Performance Measurement’, Interna-
the owner-manager of the business results on a tional Journal of Operations & Production Manage-
regular basis in order to identify problems before ment, 16, 8, 63–80.
they become unmanageable. Finally, there is also Haber, S. and Reichel, A. (2005) ‘Identifying
an indication that these good performance Performance Measures of Small Ventures: The
management practices can be learnt by experi- case of the tourism industry’, Journal of Small
ence (a trial and error approach) as well as via Business Management, 43, 3, 257–286.
Hudson, M., Smart, A. and Bourne, M. (2001)
formal training in larger organisations.
‘Theory and Practice in SME Performance
Finally, one of the more interesting discov- Measurement Systems’, International Journal of
eries made in undertaking this research was that Operations & Production Management, 21, 8,
many of the good operators assume perform- 1096–1115.
ance management activities naturally rather Kaplan, R. and Norton, D. (2001) ‘Transforming the
than as a planned or theoretically based activity. Balanced Scorecard from Performance Meas-
With these operators performance manage- urement to Strategic Management: Part 1’,
ment is intrinsic; however, what this means for Accounting Horizons, 15, 1, 87–104.
the ‘less successful’ operators is still unknown. Neely, A. Adams, G. and Crowe, P. (2001) ‘The
It may be that for these individuals the relation- Performance Prism in Practice’, Measuring
ships between performance drivers and results Business Excellence, 5, 2, 6–12.
needs to be made more explicit. If this is the Neely, A. and Bourne, M. (2000) ‘Why Measure-
ment Initiatives Fail’, Measuring Business Excel-
case, and despite the complexity of the perform-
lence, 4, 4, 3–6.
ance construct, simple but comprehensive Neely, A., Gregory, M. and Platts, K. (1995) ‘Perfor-
performance measurement models specific to mance Measurement Systems Design: A liter-
particular sectors may be able to help owner- ature review and research agenda’, International
managers develop an holistic understanding of Journal of Operations & Production Management,
their operations. 15, 4, 80–116.
Peacock, R. (1999) ‘Understanding Small Business:
REFERENCES Practice, theory and research’, Bookshelf
Australian Bureau of Statistics. (2001) ‘Accommoda- Pubnet, Adelaide.
tion Industry — Australia’, Australian Bureau Pelham, A. (1999) ‘Influence of Environment,
of Statistics, Canberra, p. 30. Strategy, and Market Orientation of Perform-
Bolin, R. and Greenwood, T. (2003) ‘Tourism Busi- ance in Small Manufacturing Firms’, Journal of
nesses in Australia’, Bureau of Tourism Business Research, 45, 33–46.
Research, Canberra, pp. 1–65. Porter, M. (1991) ‘Towards a Dynamic Theory
Brignall, S. and Ballantine, J. (1996) ‘Performance of Strategy’, Strategic Management Journal, 12,
Measurement in Service Businesses Revisited’, 95–117.
International Journal of Service Industry Manage- Richardson, J. (1999) ‘A History of Australian Travel
ment, 7, 1, 6–31. and Tourism’, Hospitality Press, Melbourne.

© 2007 Palgrave Macmillan Ltd. 1467-3584 $30.00 Vol. 7, 2, 144–155 Tourism and Hospitality Research 155