Recent Trends in Finance
and Accounting Outsourcing
in the Hospitality Industry
Rick Arpin
Just over a year ago, I
wrote about shared services
trends in the gaming
industry and in general.
Since then, we have seen
some significant activity
in the larger hospitality
industry. I think it is
worth informing you of what is happening
and the potential implications.
Hospitality Finance and
Accounting Outsourcing Activity
As I wrote last year, shared services business
models historically gained widespread adoption
in Finance, but have also become quite
common in IT, HR and Purchasing, among
other areas. Typically, outsourcing or other
sourcing models tend to follow the same lifecycle
in most industries where the services can
be outsourced as they mature, so Finance first,
and so on.
Interestingly, in the hospitality industry we
saw a slightly different pattern, as we saw
some large outsourcing deals for IT services in
the past 10 years but less activity in Finance.
That is starting to change. Here is a look at
some relevant deals:
• In 2008, Hyatt Hotels selected Genpact as an
outsourcing partner for certain finance and
accounting services in North America –
accounts payable, general accounting, credit
and collection. Services have been expanding
to other functional areas as well as other
geographies.
• Four Seasons relies on iGate to provide
accounts payable, revenue, and general
accounting services.
• In 2013, Marriott transferred one of the industry’s
most mature shared services center to
Accenture, with the deal including Accenture
providing services back to Marriott. The deal
could allow Accenture to build a stronger
industry presence and seek additional deals,
while providing Marriott ongoing improvements
in costs for finance.
Particularly after the Marriott transaction, we
are hearing that many hospitality companies
are investigating options for sourcing models
more actively than they have in the past.
One of the key reasons for this is the expanding
global footprint of hospitality companies.
It is hard enough to grow the core operations
organically – note Marriott’s acquisition of
Protea, a large hotel operator in Africa, as
Marriott had struggled getting scale in Africa
Recent Trends in Finance
and Accounting Outsourcing
in the Hospitality Industry
with their existing brands and operations.
But equally difficult is managing the backoffice
infrastructure given the multitude of
legal, language and cultural differences across
geographies. In Marriott’s case, for example,
leveraging a company like Accenture with a
global presence saves them from building that
infrastructure.
Implications for the Gaming Industry
Companies have been consistently leveraging
shared services more in recent years, particularly
as those services have realized the initial
cost savings and are moving to higher value
activities. But as we move up that value
curve, and as companies expand geographically,
it becomes harder to achieve the same
level of success internally. For example, outsourcing
providers have already built significant
infrastructure in lower-cost markets,
making it difficult for companies to penetrate
those markets with their own finance
departments.
Over the past several years, we have seen
gaming companies become more global,
making it more likely that in the future, our
industry will investigate the potential for
deals like we have seen in the hospitality
industry.
To get to that point, we will need to accelerate
our progress in areas like process simplification,
system standardization, and governance
over finance activities.
Implications for IT Professionals
in Hospitality
Outsourcing has drawbacks like any operating
model, of course. For example, the outsourcing
relationship needs to be tightly managed
and processes need to be monitored closely.
But what happens if, for example, IT outsources
some of its processes (say help desk) to
one provider, and finance outsources some of
its processes to another provider. A finance
provider employee could be calling a competitor
to get assistance with a finance system.
More likely, the IT department will have to
facilitate the finance outsourcing provider and
its services; areas like system access, data access,
transfer and security, and support of new applications
introduced by the outsourcer.
Of course, other areas of the organization will
be impacted as well – consider the HR impacts
of moving to an outsourced arrangement.
Conclusion
It is likely the trends we’ve seen in hospitality
will continue – finance, IT and HR professionals
in hospitality and gaming should
monitor these trends. What is less clear is how
rapidly, or if at all, these trends will migrate
to the gaming industry. But if they do, we
should not underestimate the impacts on the
industry.
Rick Arpin is the Senior Vice President and
Corporate Controller at MGM Resorts
International. Mr. Arpin’s responsibilities
include oversight of the company’s Finance
Shared Services Center and all aspects of
external reporting, along with assisting in
corporate finance matters. He was recently
named to Treasury and Risk Magazine’s “40
Under 40” list.