LIQUIDITY MANAGEMENT IN HOSPITALITY INDUSTRIES (A CASE STUDY OF MAIDUGURI INTERNATIONAL HOTEL LTD)

 CHAPTER ONE

1.0     INTRODUCTION:

A business enterprise it in many ways a living organism and cash flow its life stream, since few transactions take place that do not begin or cud with cash.

The hotel industry, being a service industry thrives on the patronage and goodwill of its customers, who expect the best of services at any particular point in time. Failure of any hotel to meet up with its customer’s expectations will result in the loss of such customers to its competition. The hotel industry is a competitive one with each hotel striving for leadership. The survival of the hotel in this competitive environment depends on its ability to maintain or increase its market share. It ability to maintain this market share is on its part dependent on how it is able live up to its customers expectations.

In order to live up to customers expectations the management of any particular hotel needs to effectively manage their cash resource by properly planning and controlling the cash resources in order to avoid liquidity problems such as stoppages of activities, labour strikes, inability to settle creditors promptly, etc. with its attendant unpalatable consequences.

Effective cash management strategies is therefore of the greatest importance to the financial health of the hotel industry. Cash must be carefully monitored through accounting for cash transactions and supplying management with cash reports, cash flow statements, and cash budgets especially in today’s economic climate, with its severe increasing demand for growth and competition:

1.2     STATEMENT OF RESEARCH PROBLEM

Cash management is very important for the commencing and continuous operation of a business enterprise. There are however some basic problems encountered by management in the proper planning and control of cash in order to achieve the organisation’s goal.

The problem of excessive cash in the organisation the hotel industry is a service industry, and all hotels receive cash on daily basis from its many customers to whom it renders services of lodging, catering, laundry etc.

How does Maiduguri International Hotel, Maiduguri (the sample firm) manage this daily in flow of cash, especially during peak seasons like festival periods.

Does it just let it lie idle in its vaults? or in a bank account? or is it, invested?

Also, in a situation of cash shortage in the organisation, how is the hotel: able to meet immediate and short-term cashes requirements.

Finally, since the hotel exists in a competitive and dynamic environment how does the hotel management goes in tackling the problem of competitors?

1.3    RESEARCH OBJECTIVE.

The objectives of the study are:­

1.       To review the theoretical concepts of cash management in general.

2.       To specifically appraise the cash management strategies of Maiduguri International Hotel Ltd. against the theoretical background as in I above.

3.       To investigate how much importance Maiduguri International Hotel Ltd attaches to liquidity.

4.       To highlight the strengths and weaknesses observed in the cash management system of Maiduguri International Hotel Ltd, and make necessary suggestion and recommendations to the management.

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