University of Huddersfield Repository James, Aidan M Measuring Performance in the Hospitality Industry: An evaluation of the Balanced Scorecard approach in the UK’s Licensed Retail Sector Original Citation James, Aidan M (2009) Measuring Performance in the Hospitality Industry: An evaluation of the Balanced Scorecard approach in the UK’s Licensed Retail Sector. Masters thesis, University of Huddersfield. This version is available at http://eprints.hud.ac.uk/id/eprint/9058/ The University Repository is a digital collection of the research output of the University, available on Open Access. Copyright and Moral Rights for the items on this site are retained by the individual author and/or other copyright owners. Users may access full items free of charge; copies of full text items generally can be reproduced, displayed or performed and given to third parties in any format or medium for personal research or study, educational or not-for-profit purposes without prior permission or charge, provided: • The authors, title and full bibliographic details is credited in any copy; • A hyperlink and/or URL is included for the original metadata page; and • The content is not changed in any way. For more information, including our policy and submission procedure, please contact the Repository Team at: [email protected]. http://eprints.hud.ac.uk/ Measuring Performance in the Hospitality Industry: An evaluation of the Balanced Scorecard approach in the UK’s Licensed Retail Sector Aidan Michael James BA (Hons) A thesis submitted to the University of Huddersfield in partial fulfilment of the requirements for the degree of Master of Philosophy. The University of Huddersfield August 2009 Volume 1 of 2 1 COPYRIGHT STATEMENT i. The author of this thesis (including any appendices and/or schedules to this thesis) owns any copyright in it (the “Copyright”) and he has given The University of Huddersfield the right to use such Copyright for any administrative, promotional, educational and/or teaching purposes. ii. Copies of this thesis, either in full or in extracts, may be made only in accordance with the regulations of the University Library. Details of these regulations may be obtained from the Librarian. This page must form part of any such copies made. iii. The ownership of any patents, designs, trade marks and any and all other intellectual property rights except for Copyright (the “Intellectual Property Rights”) and any reproductions of copyright works, for example graphs and tables (“Reproductions”), which may be described in this thesis, may not be owned by the author and may be owned by third parties. Such Intellectual Property Rights and Reproductions cannot and must not be made available for use without the prior written permission of the owner(s) of the relevant Intellectual Property Rights and/or Reproductions. 2 DECLARATION I declare that this dissertation is the result of my own individual efforts and that it conforms to university, departmental and course regulations regarding cheating and plagiarism. No material contained within this dissertation has been used in any other submission, by the author, for an academic award. Students Name: - Aidan Michael James Signature: - Date: - August 2009 The copyright of this thesis rests with the author. No quotation from it should be published without prior written consent and the information derived from it should be acknowledged. 3 ABSTRACT The research investigates the role of performance measurement within the hospitality industry and in particular, the UK’s licensed retail sector. The research aimed to: 1) Analyse what is meant by performance management and to establish its application and use in various types of business; 2) Explain the balanced scorecard approach to performance measurement and to assess its theoretical and business value; 3) Establish the methods of performance measurement utilised by licensed retailers and to evaluate the effectiveness of these methods; 4) Apply the balanced scorecard method in selected collaborating organisations and to compare its usefulness to more traditional methods of performance measurement; and 5) Make recommendations and evaluate how a balanced scorecard approach might improve performance management in the licensed house sector. The research highlighted a shortage of hospitality-related research with the industry predominantly using financial performance measures. The balanced scorecard was therefore put forward as a solution as it measures both the financial and non-financial performance of an organisation. The financial and non-financial performance measures used by financial analysts and pub companies were identified through questionnaire surveys and semi-structured interviews, the results of which demonstrate the licensed retail sector’s reliance on financial performance measures. Case studies were developed on a number of Managed and Leased/Tenanted pub companies (PubCo’s) which also demonstrated this reliance, although the Managed PubCo’s are beginning to embrace non-financial measures and two of the Managed PubCo’s had adopted the balanced scorecard approach. The fast pace of consolidation which is evident within the UK’s licensed retail sector had impacted upon the research as three of the PubCo’s featured in the case studies had been acquired by competitors during the study. The PubCo’s sampled for the questionnaires also changed during the data collection process, mainly due to consolidation. It was recommended that further research would be necessary to develop a balanced scorecard for the UK’s licensed retail sector. It was also suggested that further empirical research could be conducted within those PubCo’s identified as using the balanced scorecard, to determine the extent to which the balanced scorecard assists them in managing and improving both their financial and non-financial performance. The author suggests that The Centre for Licensed Retailing at Nottingham Trent University might provide the resources to continue with the research with a need also to develop standardised definitions of the financial performance measures used by PubCo’s. This development would enable performance data to be compared across the sector whilst also removing the opportunities for data manipulation by PubCo’s which was identified during the research. 4 ACKNOWLEDGEMENTS Many people have helped, both consciously and unconsciously, with this research project. It is difficult to acknowledge all those who contributed in what might sometime be quite small, but significant ways. Several people, though, have been of major assistance, and I would like to thank the following people: - 1 Geof Collyer, Head of Research – Pan European Leisure, Deutsche Bank AG. 2 David Blackledge, Finance Director, InnSpired Pubs. 3 Adam Collett, Marketing Director, Greene King Pub Company. 4 Ian Frost, Commercial Director, Avebury Taverns. 5 Jim Hill, Company Secretary, W.H. Brakspear & Sons plc. 6 Stuart Price, Financial Analyst, Panmure Gordon. 7 Julian Sargeson, Operations Director, Wizard Inns. 8 Catherine Gordon, Director of Performance & Business Intelligence EMEA, InterContinental Hotels Group plc. Finally, the greatest acknowledgements go to Professor Colin Bamford who has supervised me for the past six years. I also wish to acknowledge my parents, my brother and also my two daughters (Elysia & Emmie) who have provided me with the support and encouragement to succeed with this research study. 5 ABBREVIATIONS List of abbreviations used throughout the thesis, in alphabetical order: - ABC = Activity-Based Costing ABM = Activity-Based Management Ad Costs = Administration Costs to Sales AGM = Annual General Meeting AIM = Alternative Investment Market ALMR = Association of Licensed Multiple Retailers AOD = Advance of Discount Av EBITDAR = Average EBITDAR AWP = Amusement-With-Prizes AWP Inc = Amusement-With-Prizes Income AWS = Average Weekly Sales AWT = Average Weekly Turnover BBC = British Broadcasting Corporation BBPA = British Beer & Pub Association BCG = Boston Consulting Group BDM = Business Development Manager Beer Mar = Beer Margin BES = Business Expansion Scheme BII = British Institute of Innkeeping BLRA = Brewers & Licensed Retailers Association BNFL = British Nuclear Fuels Limited 6 BPC = Brakspear Pub Company BP = British Petroleum plc bps = Basis Points b/s = Balance Sheet BSC = Balanced Scorecard BT = British Telecommunications plc CAGR = Compound Annual Growth Rate CapEx = Capital Expenditure CAMRA = Campaign for Real Ale CBP = Centre for Business Performance CCH = Country Club Hotel Group [Whitbread] CEMP = County Estate Management (Pubs) Limited CEO = Chief Executive Officer CFD = Contracts for Difference CHK = Caterer & Hotelkeeper CHME = Council for Hospitality Management Education CIMA = Chartered Institute of Management Accountants CPS = Crown Prosecution Service COO = Chief Operating Officer Cranfield = Cranfield School of Management CROCCE = Cash Return on Cash Capital Employed CSFB = Credit Suisse First Boston CSFs = Critical Success Factors C-T = Carlsberg Tetley 7 DB = Deutsche Bank DCF = Discounted Cash Flow DEA = Data Envelopment Analysis Dep/Sales = Depreciation to Sales DIC = Dubai International Capital DLL = David Lloyd Leisure DMP = Dynamic Multi-dimensional Performance model DSCR = Debt Service Cover Ratios DTI = Department of Trade & Industry DTLR = Department of Transport, Local Government & the Regions E Anglia = East Anglia EBITDA = Earnings before interest & divisional overheads, tax, depreciation & amortisation EBITDA Mar = EBITDA