EFFECT OF COST CONTROL IN HOSPITALITY INDUSTRY (A STUDY OF VILLA MARINA HOTEL, EKET)
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CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The rate of growth in Nigeria’s hotel business is frightening, boosting rivalry in this sector. Most hotels in Nigeria attempt to achieve the standard in terms of decent lodging, good services, and good customer relationships in order to increase patronage in their business. According to (Schumpeter, 2005), in his works, innovation can simply be defined as the creation of new possibilities and opportunities for additional value added, taking into account not only the known or typical product or process innovation of production, but also the market, the level of organizational and resource input innovation. The degree of innovation is critical to an organization’s survival and growth because failure to enhance the level of innovation makes the organization vulnerable and susceptible to being knocked off by an organization that practices improved levels of innovation. According to Victorino and Verma (2006), a hotel cannot truly thrive unless it improves and invests in innovation. The hospitality and tourist industries are inextricably linked; one cannot function without the other, and the hospitality industry sees a tourism site as a superior commercial opportunity.
The competitive nature of today’s business environment, along with the need for continuous cost reduction and profitability, has made it important for a company to understand its cost components. This is to ensure that its products are created and sold at the lowest possible cost, and cost control serves as a guidepost for managers in their daily efforts to meet the organization’s corporate and shareholder goals. Cost control refers to the process of managing and/or reducing business expenses. Cost control begins with the company reviewing its expenses and determining if they are reasonable and affordable. If necessary, consumers can look for ways to save costs by trimming back, moving to a less expensive plan, or transferring service providers. The study looks at specific cost concepts including fixed and variable costs, control costs, differential costs, replacement costs, sunk costs, inventory costs, and so on. The success of any producer in selling his goods or services financially is likely to be determined by his ability to control his costs and the amount to which he can keep them below the competitive selling price. Cost control can thus be described as the regulation, limitation, or confinement of costs.It can also be defined as management activity that regulates the cost of managing a business, particularly when such action is driven by cost accounting. It addresses the control of material usage and wage prices, isolating the influence of efficiency from pay rates, as well as maintenance and service costs and all other indirect expenditures. In an organization, it is the act of making appropriate adjustments after comparing the actual cost to a standard or planned cost. The control process includes the phases of defining standards and implementing corrective measures.
Studies on potential cost control and various adjustments that may result in cost control are therefore very important for improving the efficiency with which any business is conducted; such an improvement can be of immense benefit to both marketers and ultimate consumers of the business’s products. Effective cost control consists of two aspects: operational cost control, which deals with the type of control that exists in very small enterprises where the lone owner can physically manage costs by personal observation and direct supervision of operations. Accounting cost control, on the other hand, entails developing a sound system of record keeping to establish cost accountability, as well as the use of current, relevant, and concrete accounting and statistical reports to show how people in charge of cost are carrying out their responsibilities.
1.2 Statement of the problem
Every production company’s management is typically concerned with establishing rules and regulations, including policies, that are comprehensive enough to cover or apply to all functional areas of the organization. These areas include cost reduction functions, which are performed on a daily basis by the majority of employees, in order to ensure effective and efficient internal and cost control. In order to maximize profits, any restricted resources must therefore be able to generate a larger output and compare their actual cost to the anticipated cost. Only approximately 30% of the benefits of the significant efforts made to boost the growth of Nigeria’s hospitality industries have been apparent; the primary challenges these sectors confront in Nigeria are a lack of appropriate financing and location. Financed in the sense that most hospitality businesses lost customers and brand reputation as a result of their inability to stay up with technology improvements.
1.3 Objective of the study
The primary aim of this study is to investigate the effect of cost control in hospitality industry. The specific objectives are;
- To assess the relationship between cost control and hospitality industry.
- To ascertain the effect of cost control in hospitality industry.
- To examine the benefit of cost control in hospitality industry.
1.4 Research Questions
The following questions were formulated in-line with the objectives of this study;
- Is there any significant relationship between cost control and hospitality industry?
- Does cost control have an effect in the hospitality industry?
- Is there any benefit of cost control in hospitality industry?
1.5 Research Hypothesis
The following hypotheses are formulated to be tested at 0.05level of significance:
H0: There is no significant relationship between cost control and hospitality industry.
H1: There is a significant relationship between cost control and hospitality industry.
H0: Cost control does not have an effect in the hospitality industry.
H2: Cost controls do have an effect in the hospitality industry.
H0: There is no benefit of cost control in hospitality industry.
H3: There is a benefit of cost control in hospitality industry.
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