The Irish Hotels Federation (IHF) has acknowledged the acceptance by Mr Micheál Martin T.D., Minister for Health & Children that hotel bedrooms are granted private residential status within the smoking ban regulations. It stated that together with a strict Code of Practice for implementation, a practical and welcome solution has been attained, in respect of bedrooms, that removes a major concern for the Irish tourism sector, while at the same time protecting the welfare of staff.

According to Jim Murphy, President, IHF, the Federation will work closely with the Department of Health & Children and the Office of Tobacco Control, in finalising the appropriate codes of practice for practical implementation of the regulations.

"We will be recommending that our members implement, in as far as is reasonable, the various codes of practice being developed for the implementation of the new regulations," says Mr Murphy. "There is no doubt that 2004 will be a difficult year for the hospitality industry and for our smoking customers, as we all adapt and adjust to this new environment."

"However, we are pleased that the Minister has accepted that hotel bedrooms are, in practice, private residential areas where, in general staff enter only with the permission of the guest.

All other countries, which have forms of a smoking ban, allow designated smoking bedrooms in hotels and Ireland will now be in line with this practice."

"Staff are present in hotel bedrooms for a limited period, at times when the room is vacated and we believe the code we have suggested will ensure that during this period there is insignificant, if any, exposure to the harmful effects of cigarette smoke. As employers we are committed to providing a safe work place for employees as well as offering a pleasant environment for our customers to enjoy our product. Our staff are our biggest asset, we obviously wish to protect them, we believe a strong practical code is a constructive measure to protect both the health of our staff and the commercial viability of our product," concludes Mr Murphy.

The proposed IHF Code of Practice submitted to the Minister for Health and Children includes the following provisions:

• Designated smoking bedrooms in hotels - Rooms to be clearly marked or - Designated smoking floors

• No smoking while staff in bedrooms

• No smoking for 2 hours prior to rooms being serviced

The 48th General Assembly of HOTREC took place in Dublin recently which p rovided a forum for a broad range of issues of relevance to the hospitality i n d u stry to be discussed. Mr David Byrne, EU Commissioner for Health and Consumer Protection addressed the General Assembly in Dublin (see page 3). Pictured is (l-r) EU Commissioner David Byrne with Annette Whyte and Jim Mu r p hy, President, Irish Health Federation (IHF).

A state of the art 2,000 seat National Conference Centre could be completed by 2007 following the announcement by Tourism Minister John O'Donoghue TD, that he is seeking proposals for its construction. A Notice Inviting Expressions of Interest in the provision of a National Conference Centre for the Dublin area is being advertised in the Official Journal of the European Union with a deadline of 21 January for requests to participate.

“The publication of this Notice represents another important milestone on the road to achieving a National Conference Centre for Ireland”, said the Minister, adding that, "if acceptable proposals are received, the National Conference Centre could be constructed before end 2007".

Minister O'Donoghue said that the establishment of a National Conference Centre in Dublin in partnership with private sector investors is one of the key actions to support tourism product development and innovation.

“Conference visitors are high spenders who, if the experience is right, will extend their stay or return later for private holidays. It has been estimated that an additional 30,000 annual visitors could be generated through the availability of a dedicated centre. The additional annual foreign revenue that could result from such a facility, independently estimated at between €25m and €50m, would be very welcome indeed,” the Minister stated.

The IHF has for many years called for this crucial facility to be provided as part of the national infrastructure so that Ireland could compete for the international conference market. All other EU capitals boast such centres and Ireland has been at a distinct disadvantage. The plan to move forward with the delivery a national conference centre for Dublin is a major positive development for the Irish economy and will provide direct benefits to the Irish tourism industry.

The first ever tourism marketing campaign for the Cooley Peninsula is being undertaken to increase awareness of the area in national and international tourism markets. Devised by Carlingford/Cooley Tourism, the initiative will profile the area as a place where visitors can enjoy breathtaking scenery, warm hospitality, fine dining, entertainment and a full range of easily accessible activities.

A range of promotional materials have been produced emphasising the Celtic mythology of the area and its close links with Án Táin Bo Cualigne. The initiative is grant aided through Louth County Council Led Task Force under the EU Programme for Peace and Reconciliation II and part financed by the Irish Government under the National Development Plan.

The 6% increase allocated to Tourism Services announced by the Minister for Finance in the Book of Estimates has been welcomed by the IHF. It particularly acknowledges the 4% increase in the tourism marketing fund allocated to Tourism Ireland and Fáilte Ireland which it states, when married with the marketing campaigns provided by the private sector, will enable the industry to maintain the current levels of promotion both domestically and overseas.

The IHF particularly acknowledges the success of Mr John O’Donoghue, T.D. Minister for Arts, Sports and Tourism in convincing his Government colleagues of the extent of the economic and social importance of the Irish tourism sector. John Power, Chief Executive of the IHF, welcomed the increase saying, "In the current difficult and highly competitive international tourism environment it is essential that adequate funding is available to sustain effective marketing efforts."

Fáilte Ireland has announced a new initiative to address the costs of insurance across the tourism sector in co-operation with the Irish Hotels Federation and the Restaurants Association of Ireland. Risk and insurance specialists, Marsh Ireland, have been commissioned to gather data on premiums and claims experience across the sector, including B&Bs, restaurants and hotels, which will provide the information required to engage in dialogue with insurers.

It has been estimated that this approach could deliver savings of up to one-third for tourism enterprises in time for the 2004 season. Competitiveness is a crux issue in the sector and insurance has become the larg est below the line co st for hospitality operators – outside employment and consumables.

Welcoming the announcement, Irish Hotels Federation chief executive, John Power said, "Insurance costs are, next to wages, the highest cost for hotels and guesthouses. If we are to be competitive these costs must be reduced by over 60% over the next two years. This initiative, under the auspices of Fáilte Ireland, appears to have potential and the IHF will be using every effort to ensure that its implications are fully explored."

Gillian Bowler, Chairman of Fáilte Ireland, explained. "The average premium in the UK or Northern Ireland is about half that applying here. The industry is becoming more price conscious in terms of delivering value for money to visitors, but cannot achieve this when faced with rising costs such as insurance. Clearly many of the issues involved in insurance costs are complex. Bringing together a group of SMEs, geographically and sectorally diverse, will offer an opportunity for greater transparency on claims, and negotiation with the insurer’s loss adjuster to avoid the expensive mechanism of the courts."

The first phase of the project is expected to be complete by December and all tourism operators are invited to contact their representative organisation to contribute to the collection of data.

Responsible drinking, food hygiene, labelling, VAT and copyright were all debated at length at the 48th General Assembly of HOT R EC, the association representing hotels, restaurants and cafés in Europe, held in Dublin recently. Guest speakers included David Byrne, EU Commissioner in charge of Health and Consumer Protection and Paul Bates, Assistant Secretary at the Department of Arts, Sport and Tourism.

Mr Byrne informed delegates of the latest developments within DG SANCO (Directorate on Health and Consumer Protection) concerning food safety, food labelling, and responsible drinking. In addition, he outlined the Commission’s proposals in relation to food claims specifically when foods make health and nutrition claims and how these will need to be substantiated scientifically and authorised at EU level in the future. HOTREC member associations stressed to Commissioner Byrne the need to differentiate between restaurants and retailers when applying labelling rules; the difficulty of applying strictly the forthcoming extension of hazard analysis in food hygiene, the importance of carrying out rigorous cost risk assessments on legislative proposals and the negative impact that rigid and imposed rules on smoking and the sale of alcohol could have on the sector.

During the event, specific attention was given to copyright as the European Parliament is presently discussing a draft report "Community framework for collecting societies in the field of copyright". Hotels and guesthouses pay fees for copyright and neighbouring rights in relation to public performances in their establishments. The sector fully acknowledges that authors and performers are entitled to a fair compensation and fully agrees to pay for the copyright and neighbouring rights services, which it receives. The hospitality sector pays half a billion euro per year for copyright and neighbouring rights. It, therefore, feels entitled to call for transparency and fairness in the management of copyright and neighbouring rights by the collecting bodies. The HORTEC General Assembly agreed on a text to be submitted to the European Parliament and the European Commission, calling for transparency, competition and more efficiency within the collecting bodies.

HOTREC is a spokesperson of hotels, restaurants and cafés sector at European Institutional level in all matters affecting the sector. HOTREC projects the voice of hotels, restaurants and cafés in the European Union, an industry that boasts 1.5 million businesses and provides 6 million jobs in the EU alone. HOTREC brings together 34 National Trade and Employer Associations representing the interest of the sector in 20 different European countries.

Pictured at the HOTREC meeting in Dublin are (l-r) Henry O’Neill, Chief Executive, Restaurants Association of Ireland; Geraldine Byrne; David Byrne, EU Commissioner for Health and Consumer Protection and John Power, Chief Executive, Irish Hotels Federation.

At the HOTREC event (l-r) David Byrne, EU Commissioner for Health and Consumer Protection; Joaquim Cabrita Neto, President, HOTREC; Cllr Royston Brady, Lord Mayor of Dublin and Owen Brooks, Home Markets Director, Bord Bia.

Mr John O'Donoghue TD, Minister for Arts, Sport and Tourism, recently announced the opening of negotiations on an Authorised Destination Status (ADS) agreement with China, which allows for package tours to be organised to Ireland. According to the World Tourism Organisation in 2001, the Chinese outbound travel market has averaged more than 20% growth per annum. In 2001, the Chinese made an estimated 12 million trips a broad representing growth of some 140% in five years and 15% on 2000.

The Chinese are also among the highest spenders per capita on travel abroad, generating a ave rage US$2,090 per trip of an average 12 night trip, according to the China Travel Monitor. Aust ralia has recorded phenomenal growth out of China since it gained its ADS.

Minister O'Donoghue said at the announcement that China is the great tourism frontier. "Many reckon that it will become the largest outbound tourism market in the world. In the medium to long term, it holds significant potential for Irish tourism."

It is not possible to develop group tourism from China to Ireland unless Ireland has secured Authorized Destination Status. The ADS sy stem is based on the premise that participants in Chinese tourist groups enter and leave the State as a group and travel within the State as a group according to an established travel programme. An ADS agreement is a technical agreement with core provisions, which govern the visa application process for group travel, the regime governing that group travel, and designation of travel agents in China to operate an ADS system.

It is expected that these negotiations will proceed rapidly.

The full membership of the new Shannon Airport Authority board, comprising twelve members and four working directors has been announced.

Mr. Patrick Shanahan will be appointed Chairman of the Shannon Airport Authority. Other board members include Patrick Blaney, international aviation expert, Rose Hynes, aviation lawyer and consultant, Tadhg Kearney, Chairman of the Air Transport Users Council, Michael B. Lynch, Group Managing Director of the Lynch Hotel Group, Padraic Burke a corporate finance expert, Reg Freake, Senior Executive of Dell Group, and Olivia Loughnane, Communications, Research and Development Director of Shannon Development Company (SFADC).

Legislation is due to be enacted before the end of the year, to establish Shannon, Cork and Dublin as fully independent and autonomous airport authorities under State ownership.

While every hotel and guesthouse should have a strategy and a long term plan it must also look at what needs to be accomplished in the short term in order to achieve those plans.

Short term planning is a crucial element of the management of any hotel in Ireland today. Indeed, for most businesses short term planning takes the form of an annual budget.

What is a budget?

A budget is a plan quantified in monetary terms. It is a refinement of the long term plan and takes into account the resources currently available and those required for the business to achieve its potential.

It is essential that the annual budget should be prepared and approved prior to the commencement of the financial year. This allows a benchmark to be put in place against which performance can be measured.

The budget should detail projected revenue and expenditure. It should also incorporate a capital expenditure plan, which will typically look several years ahead. Projected monthly cashflow statements are usually a key feature of any budget.

It is recommended that budgets should be, at a minimum, prepared annually and should cover the following twelve months, on a month-by-month basis.

What does budgeting achieve?

The main benefits of budgeting are as follows:

• Compels planning – it forces you to look ahead

• Allows you to identify areas where contingency plans may have to be implemented

• Co-ordinates the activities of the various departments of the business and ensures that they are in harmony with each other

• Forces communication of ideas and plans to everyone affected by them

• Establishes a system of control i.e. by comparing actual results with budgeted amounts, issues can be identified and corrective action taken

• Can motivate management and employees to improve performance

• Allows performance of key employees to be evaluated

How do I prepare a budget?

• Budgeting should be a participative process involving all departments of the hotel such as the bar, restaurant, shop, gym etc. Guidelines should be established and communicated to those responsible for preparing departmental budgets e.g. the long term objectives, the key assumptions, the format required and the timeframe

• Determine the factor that restricts performance e.g. number of beds/room rate etc.

• Prepare the revenue budget - the revenue budget projects what total revenue will be from all sources. It provides the basis for the preparation of the expenditure budgets since all expenditure is ultimately dependent on projected revenue. If the revenue budget is not accurate, then the expenditure budget estimates cannot be relied upon

• Financial projections should be based on either previous experience or assumptions which can be supported. It should not be assumed that the previous year’s revenue/expenditure will be repeated. Investigate the reasons for previous increases/decreases in revenue and expenditure and then establish if these increases/decreases will be repeated

• Consider the behavioural aspect of budgeting – budgets can have a negative effect if they are set too high and are unrealistic or if the person responsible for controlling the budget is not consulted when preparing the budget

• Co-ordination and review of budgets - Overall responsibility lies with the hotel manager. Budgets must be reviewed to ensure that they make sense, are realistic and that all departments are working towards a common objective and are in harmony with each other

• Consider the qualitative issues – what are their financial impact?

• Ensure that the figures are correct

I have prepared the budget – what next?

Once established, the budget is used as a benchmark against actual revenue and expenditure. Budgetary control involves the continuous comparison of actual with budgeted results. The differences between budgeted and actual are called variances.

Variances should be analysed between those that are within the control of the individual responsible for the budget and those that are outside of their control. Identification of variances on a timely basis means that corrective action can be taken quickly. Timely monthly management accounts are essential for budgetary control.

Budgetary control is an inherent tool for management control purposes. Key ratios should be prepared prior to the beginning of the year and can be used to monitor and control performance. Key financial ratios in the hotel industry are gross margin, average daily room rate, revenue per available room etc.

Conclusion

Budgeting is a continuous and dynamic process. People should be responsible for delivering the sections of the budget that are appropriate to them. It is essential to have an ongoing review to ensure that everything is going according to plan - if not - investigate and take corrective action.

Remember – a budget is the roadmap for your business!

In December’s issue:

Cash flow management

Eileen Corrigan is a Senior Manager in the Business Assurance and Advisory Services department of BDO Simpson Xavier Tel 01- 4700182, email: ecorrigan@bdosx.ie Eileen Corrigan, BDO Simpson Xavier