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1. Who is Tommy Saleh, what is his job title and duties and whattype of hotel does he work for?

2. What event did he have to analyze to determine if his companyshould go forward with it? Summarize the process he and his companywent through to make their decision on whether or not to hold theevent.

• Tommy Saleh has the type of job that a lot of people probablydream of.
• He is paid to make sure his organization, the TribecaGrand
• Hotel in New York City, remains on the cutting edge ofcool.
• Whether that means hosting an informal concert in thelobby
• with the Kings of Leon, or helping to host the Tribeca
• Film Festival in their basement screening room, Tommy gets
• paid to keep his finger on the pulse of current culture.
• Budgetary planning plays a significant role in Tommy'sjob,
• and he is evaluated in part by how he controls costs.
• Each year, the planning process for the company's
• annual budget normally begins in the 4th quarter.
• Saleh: We probably meet around the end of September, and
• we involve the CFO, the COO, and the general managers.
• Narrator: The master budget covers all aspects of
• running the hotel, but Tommy's events budget is
• particularly significant, because, let's face it,
• there are lots of cool hotels in New York City.
• Clients choose to stay at the Tribeca knowing that Tommy'splanners, event specialists and
• his concierge team are plugged into not just New York City, butthe larger world stage.
• As Tommy plans and implements his events budget, the key is tomaintain budgetary
• control, including budget reports that compare plannedobjectives with actual results.
• A budget can cover any length of time and any purpose,
• so formalized reporting systems help by identifying
• the name of the budget report, the frequency of the
• report, the purpose, and the primary recipients.
• Let's look at an example of budgetary control
• activities, and, for this, let's go back to 2002,
• when the Tribeca Film Festival was created to combat
• the economic effect of 9/11 on lower Manhattan.
• Saleh: The Tribeca Film Festival started with Robert
• DeNiro's idea of bringing something to the downtown area.
• Narrator: The hotel had to develop a budget for events theywould host.
• Then, after the festival, they analyzed what they planned
• from what was actually spent, and took corrective action.
• They increased the budget for the following year—it was
• a big success—and modified future plans accordingly.
• This cycle of control activities can be used over and over,and, when
• implemented properly, can help management to evaluateperformance.
• Now, if Tommy was responsible for just one hotel event
• each year, he could probably get by with a static budget.
• But he has many events, some of which occur on
• short notice, so he relies on a flexible budget,
• which is really just a series of static budgets
• that account for a wide variety of activities.
• The basic idea behind responsibility accounting is
• that large, diversified organizations, especially
• those with multiple product lines, are difficult,
• if not impossible, to manage as a single segment.
• Breaking them up into smaller segments allows responsibility tobe assigned to
• managers that have the authority to make day-to-day decisionsat that level.
• Evaluating a manager whose performance can be quantified,
• like a sales manager, is fairly straightforward.
• But what about someone who contributes indirectly
• to the profitability of an organization? To answer this, it'simportant to
• understand profit and cost centers. Profit centers in anorganization do exactly
• what they sound like: they generate profits.
• Hotel profit centers are typically sleeping rooms,
• events, restaurants, and catered food functions.
• Saleh: The rooms are the main income for the hotel.
• Food and beverage is not an amenity here, only it's actuallyanother source of revenue,
• where people want to try the shop that you have, or expect24-hour room service.
• Narrator: Cost centers incur costs but don't directly generaterevenue, but you need them.
• In a hotel, they might be marketing, engineering,
• human resources, and, yes, accounting. Okay now, let's havesome fun.
• Let's take everything we've learned and apply it to a realworld example.
• We mentioned the time that the Kings of Leon were staying atthe Tribeca.
• Saleh: And they go, "Why don't you just put a secret gig forthe, um, for our fans?"
• Narrator: Now, Tommy didn't have a "Kings of Leon secret
• gig” budget, on the off-chance that they ever showed up at
• his hotel, but since he made use of flexible budgets, hewas
• ready, and had a basic idea of what his costs would be.
• Saleh: One of those projections was based upon what
• would the total night cost us when we do it from a to z.
• Narrator: Including everything from building a temporary soundsystem,
• to hiring doormen, and even bathroom attendants.
• Keep in mind that some of these budget items are a result
• of valuable lessons from past budgetary controlactivities.
• Armed with this budget, he did a quick ROI evaluation
• to determine if the event would be profitable. In the end, theevent
• was a huge success. But from a profit/cost centerperspective,
• what if it had been slightly unprofitable? From a marketingstandpoint, there
• certainly were other benefits. Saleh: It's good
• promotion for the hotel. It's great press for the hotel.
• Narrator: So, maybe you compensate by canceling anotherevent
• later in the year that wouldn't have had the same impact.
• The point being, budgetary control allows managers like Tommyto not only
• do their job, but to take advantage of opportunities when theyarise.
• And from a responsibility accounting perspective, this hasserved Tommy well.
• Sure, his events help drive profits, but what they
• really do, in an industry where boutique hotels
• come and go, is to help keep the Tribeca Grand both
• relevant and hip as a key Manhattan destination.