Proceedings of 26th International Business Research Conference
7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7
Capital Expenditures and Financing in the Hotel Industry: A
Case Study of Malaysia
Dr. Noorhayati Mansor*, Dr. Masyhuri Hamidi** and Mr. Yuzaini Janin***
This research supports the continuous effort of Malaysian government to
promote sustainability in the hotel industry. Hotel operation is both labour
and capital-intensive. Depending on the hotel star rating guests expect
hotel facilities and service level to match with the rates charged.
Facilities and maintenance require large capital investment for the initial
construction and subsequent up-grading and renovations. This research
examines the current practice in accounting for and reporting of capital
expenditures (capex) and operating expenditures (opex). Chief
Accountants/ Finance Managers of four major hotels in Kuala Lumpur
participated in this study. Face-to-face interviews were conducted
between the months of September to December 2012. This research
contributes to fill the gap in the literature by addressing the operational
issues in capex accounting, discussing the influence of ownership
structure and highlighting the preferred source of financing. The industry
has to incur large capital spending even during economic downturn and
needs to balance its total available investment between capital and
human resource since both are crucial for sustainable business. Capex
incurred during low growth periods were either due to prior approval and
must be spent or critically necessary to keep up with competitors. The
accounting practice varies among hotels when dealing with grey areas of
capex and opex accounting. Hotel ownership structure determines the
accounting for capex and opex, and each hotel management develops
its own standard procedures and guidelines for capex and opex
accounting. Hotels operated under management contract are relatively
faster in responding to industry trend than owner-operated hotels. The
case studies reveal that hotel investment in capex involves strategic and
complex financing decisions. Financing for capex is highly influenced by
the availability of internal cash flow. The study concludes with
highlighting main challenges for the industry and suggestions for future
research.
Filed of Research: Accounting and Finance
Track: Management Accounting and Finance
*Dr. Noorhayati Mansor, Graduate School, Universiti Sultan Zainal Abidin, Kuala Terengganu, Malaysia.
Email: nhayatimansor@unisza.edu.my
**Dr. Masyhuri Hamidi, Faculty of Economics, University of Andalas, Padang, Indonesia.
Email:masyhurihamidi@fekon.unand.ac.id
***Mr.Yuzaini Janin, Department of Tourism Management, Universiti Malaysia Sabah, Malaysia.
Email: yuzaini@ums.edu.my.