Chapter 1: The Role, Cost, and Management of Hospitality Facilities

Focus on Vocabulary

CapEx – Capital expenditure. A major expenditure category in the hospitality industry covering replacement of worn-out furniture, finishes, and soft goods, wear and tear, obsolescence, regulatory requirements such as ADA and life safety, franchise product demands, changing technology, market demand for product change, and replacement and renovations of building components and heavy equipment.

ADA – Americans with Disabilities Act. The textbook makes frequent reference to this US federal legislation that mandates owners and operators of public facilities provide certain accommodations for people with disabilities, (i.e. wheelchair ramps/elevators). In Canada, Section 15 of the Canadian Charter of Rights and Freedoms grants these essential human rights to persons with disabilities.

Facilities management companies – Companies with the expertise to provide services such as housekeeping, grounds, and physical plant management to hospitality companies, schools, universities and various industries.

FF&E – Furniture, fixtures, and equipment, a major portion of CapEx.

Franchise agreement – An agreement under which one entity that has developed a particular pattern or format for doing business – the franchisor – grants to another entity – the franchisee – the right to conduct such a business provided it follows the established pattern.

HVAC – Heating, ventilation, and air conditioning. The general term applied to a property’s temperature management system. It includes heat and refrigerated air systems and attendant ductwork, airflow machinery, and control devices.

Management contract – An agreement between the owner / develop of a property and a professional hotel management company. The owner / developer usually retains the financial and legal responsibility for the property, and the management company receives an agreed-upon fee for operating the facility.

POM – Property operation and maintenance. One of two principal cost entries (with utilities) in the hospitality industry detailing ongoing costs of operation following construction of the facility.

R&M – Repair and maintenance. Generally applied to costing procedures, R&M comprise the maintenance expenses incurred in the regular and unanticipated repair and maintenance of a property’s physical assets.

Replacement reserves – Cash reserves (the amount usually based on a percentage of gross revenues) set aside largely for maintenance and repair needs. Management contracts commonly require that operators fund replacement reserves for FF&E.

TAB – Testing, adjusting, and balancing. In the building commissioning process, TAB is one of the verification elements that ensures the quality of the installation of systems in the facility (for example, the HVAC and water systems.)