Customer profitability analysis with time-driven activity-based costing: a case study in a hotel

Abstract

Purpose - The purpose of this paper is to show the implementation of customer profitability analysis (CPA) using time-driven activity-based costing (TDABC), in a Turkish hotel. Design/methodology/approach - A case study was conducted in a four-star hotel with 100-room capacity in the Cukurova region of Turkey. Interviews, direct observations, and documentation collection were used to collect the data. Findings - The results showed that some of the customer segments which were found unprofitable under the conventional ABC method were determined profitable using TDABC. The case study also revealed the cost of idle resources devoted for front office, housekeeping, food preparation, and marketing activities. Research limitations/implications - Only a single hotel operating in Turkey is examined in this paper. Further research should focus on implementing CPA using TDABC in other hotels in Turkey and abroad. Practical implications - Based on the results of the study, the hotel management is better able to understand profitability of different customer segments and implement appropriate strategies. Moreover, the time equations of TDABC are considered to provide hotel management with an opportunity to better balance the capacities supplied in departments. Originality/value - There is limited research relating to profitability analysis in service companies in general and in the hotel industry in particular. Therefore, this paper is unique in the sense that it analyzes the use of TDABC systems for CPA within a real case hotel.