Seminar Paper, 2004, 28 Pages
List of illustrations
List of abbreviations
2. Features of ski resorts
3. Structure of the controlling in ski resorts
3.1 Strategic and Operative Controlling
3.1.1 Strategic Controlling
3.1.2 Operative Controlling
3.2 Controlling in the organizational structure
3.3 Controlling process in ski resorts
3.3.2 Planning course in ski resorts
3.4 Costing and revenue accounting
3.4.1 Cost sections
3.4.2 Cost system
3.4.3 Revenue accounting
4.1 Marginal costing
4.2 Activity based costing
4.3 Capital budgeting
4.5 Yield management
4.6 Further tools
5. Information resource Management
5.1 Electronic Data Processing (EDP)
5.2 Reporting and ratios
List of references
Attachment A: Functional account chart of a ski resort company
Attachment B: Dynamical capital expenditure account method
Chart 1: Contents of the strategic Controlling
Chart 2: Contents of the operative Controlling
Chart 3: Model of a ski resort planning process
Chart 4: Selected ratios for Austria
Chart 5: Selected benchmark (Austria): Lift turnover per customer
Chart 6: Extract of the main season tariffs at Axamer Lizum, Austria
illustration not visible in this excerpt
(Bayrische Zugspitzbahn AG, annual report 2000/ 2001)
In the last 50 years winter sport became a major economical size in mountain regions, especially in the European Alps and the Rocky Mountains. Until 1979 a lot of new ski resorts were developed. At the beginning of the 80´s the politicians intervened in the wild extension in the Alps and organized the development of this natural space. The rapid expansion was finished.[i] In the 80´s and 90´s, the enterprises began to integrate further parts of the value chain. Pure lift operators became big ski resort companies. From the beginning of the 90´s the growth of winter sportsmen stagnated.[ii] In total there are about 32 million skiers in Europe.[iii] Nowadays it is nearly impossible to open new resorts. Consequently the ski resort companies are more asked to improve their services, make up combinations with other resorts, built up co- operations or downsize the companies to compete with other ski resorts in the mountains. This market is really hard battled and the suppliers try to find their niches like family-, pure sport- or snowboard resorts. They started to concentrate on their core competencies at the end of the 90´s and invested huge amounts of money to up-grade the important transport possibilities like chair lifts or gondolas in the whole resorts.
Most of the smaller and middle sized ski resorts work with deficit.[iv] This made it ex-tremely important in the 90´s for businesses to introduce new divisions in the organizational structure to control and support the management.[v] Nowadays only about 50 percent of the ski resorts know Controlling as a division of the management; therefore they often invest money without knowing the affects of it.[vi] The increasing importance of Controlling in ski resorts is shown by the fact that PwC Switzerland has got an own team for this subject.
Due to the shortness of this seminar paper there is only a coarse outline of the subject with a focal point on medium and big sized companies represented with it.
Ski resorts are very complex systems. As mentioned[vii] ski resorts integrated a lot of objects around the winter holiday industry in their area. These companies own a lot of value added services around the ski lifts, as there are:
- Ski schools
- Feeder roads[viii]
Ski resorts are often owned by the local community, the federal state or with shares by private persons or other companies. They have got an effect on the whole region around the holiday area. Their characteristics are high fix costs, as a result of a cost intensive lift infrastructure, which has also got a long term amortization.[ix] Snow is the most essential material in ski resorts; therefore a lot of slopes were made from artificial snow.[x] This problem will be worse in future as the snow boundary will rise up to 1800 m, caused by the global warming.[xi] Slope safety is also a high cost factor because deaths caused by avalanches combined with bad press can influence the turnover on a long term. Another significant cost factor is the new conditions for fire protection in the means of transport after the disaster of Kaprun in 2001.[xii]
The marginal costs in total are relatively small compared with the fix costs. Due to this reason there is a high importance filling up the capacity limit to realize economies of scale.[xiii] This capacity is the ultimate limit and it is not possible to boost this at short term. They are also marked with very high fluctuations in demand. There is an extremely higher demand on weekends than on weekdays and it also varies in the summer and during the winter season.[xiv]
It is possible and very important to segment the customers. There are different users of the alpine infrastructure in the summer and in the winter season. In the summer season mostly elder hikers visit the mountains and in the winter it is the sport interested client.[xv] So, as in most service industries, it is important to concentrate on the customers as there is a high substitution for them. The most important factor for getting an excellent yield is the weather, and it is not possible to influence this aspect.
Strategies are considered procedures for reaching the set goals.[xvi] It includes the planning of the mission and vision of the company.[xvii] Strategies have got a future and qualitative character, strengths and weaknesses are in the focus. It is vital to find future potentials to reach a better position in the market and to secure the lasting growth of the (ski resort) company.[xviii] The temporal spectrum is long-span, but it also affects the current situation. For that reason the importance of identifying future impacts is given. This could be exemplary the enlargement of the catchment area, like the strategy of the Salzburger Land. They started to cooperate with Russian ski resorts nearby Moscow to generate new customer groups. This new distribution market is very important for the future of this area.[xix]
Chart 1: Contents of strategic Controlling
illustration not visible in this excerpt
Source: In dependence on Horvath, P. (2003), p. 201
The field of Controlling works in this part with empirical values, product life cycles and scenario techniques.[xx] It is also important to plan the accurate investments with capital budgeting as they have got a long term amortization.[xxi] The aim is to arm the ski resort company planning based against all contingencies.
Operative Controlling backs the realization of the set strategies. The strategies are subdivided into several steps; these are then subdivided into activities and measures to be taken. Therefore it is essential to evaluate them monetarily and to set priorities. The Controller supports the management with the coordination of the operative planning, budgeting, monitoring and reporting.[xxii] Controlling navigates the different activities mostly with actual versus target comparison, liquidity budgeting, marginal costing and variance analysis.[xxiii] The information sources are internal from the accountancy and the bookkeeping department as well as external from different sources like media or organizations.[xxiv] Controlling also works with benchmarking. The target entity in this case is the best practice in the branch. Ski resorts furthermore work with Target Costing in fields like gastronomy or ticketing, in order to find the price that the customer is willing to pay.[xxv]
With the orientation on functional measure sizes preconditions were created for strategic management functions, with what the combination of strategic Controlling gets created.[xxvi] In the following chart are the elements included, which concretize the operative Controlling.
Chart 2: Contents of operative Controlling
illustration not visible in this excerpt
Source: In dependence on Vock, C. (1996), p. 54
Controlling is a subsystem of the company management, which is connected through relations to other subsystems (e. g. departments).[xxvii] One of the main tasks in Control-ling is to coordinate these subsystems for supporting the management.[xxviii]
There are different aspects of putting the Controlling into line or into staff function without instruction competence. But without competence the Controlling has only limited possibilities to infiltrate the operative units. Therefore the Controller also needs social competence to fulfill his work satisfactory. As the Controlling has to work with several departments in the organization, it is important to put this sub-system beside the executive board as staff function. This hierarchical assignment secures the successful work of the Controlling unit. This categorization underlines the task, importance and neutrality of the Controlling.[xxix] In Ski resorts, due to the very complex company structures, it is a recommendable way to put the Controlling unit beside the executive board. But it also depends on the size and on the requirements of the company where to put this element of the management.[xxx]
[i] Cf. www.seilbahnen.org on Feb 12th, 2004.
[ii] Cf. Seilbahnen Schweiz (2003), p. 20.
[iii] Cf. www.seilbahnen.at on Feb 12th, 2004.
[iv] Cf. Kanzler, H. (2004).
[v] Cf. Renner, F. S. (2004).
[vi] Cf. Vanat, L. (2004).
[vii] Cf. chapter 1.
[viii] Eg. Axamer Lizum, Austria owns a 8km long street from Axams to the resort
(Lechner, T. (2004)).
[ix] Depending on the lift it is mostly 15 – 20 years, as the service life is about 40 years
(Lechner, T. (2004)).
[x] In Austria it is about 35 % (www.seilbahnen.at on Feb 12th, 2004).
[xi] Cf. Das Erste (2004).
[xii] The BZB invested about 1,5 million € in the safety of the infrastructure (Renner, F. S. (2004)).
[xiii] Cf. Fitzsimmons, J.A. / Fitzsimmons, M. J. (2001), p. 14.
[xiv] Cf. Renner, F. S. (2004).
[xv] Cf. Lechner, T. (2004).
[xvi] Cf. Botta, V. (1998), p. 347.
[xvii] Cf. Horvath, P. (2003), p. 198.
[xviii] Cf. Botta, V. (1998), p. 349.
[xix] Cf. Salzburger Land Tourismus GmbH (2003), p. 23.
[xx] Cf. Dintner, R. (1999), p. 8 +.
[xxi] Cf. Renner, F. S. (2004).
[xxii] Cf. Dintner, R. (1999), p. 10.
[xxiii] Cf. Dintner, R. (1999), p. 10 +.
[xxiv] Cf. Botta, V. (1998), p. 351 +.
[xxv] Cf. Renner, F. S. (2004).
[xxvi] Cf. Vock, C. (1996), p. 54.
[xxvii] Cf. Fischer, R. (2000), p. 11.
[xxviii] Cf. Fischer, R. (2000), p. 12.
[xxix] Cf. Botta, V. (1998), p. 340.
[xxx] Cf. Renner, F. S. (2004).
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