Influence of financial management control on performance of hotels in lake region, Kenya

Abstract

In the contemporary hospitality industry, financial management control plays a pivotal role in determining the operational success and sustainability of hotels. As global and regional markets grow increasingly competitive, hotels must adopt robust financial control mechanisms to ensure prudent resource allocation, cost efficiency, and revenue maximization. The performance of hotels in Lake Region is crucial to the region's economy, contributing significantly to employment, tourism, and local development. However, many hotels in this area continue to face financial challenges, including irregular cash flows, mismanagement of funds, and inefficient financial controls, which adversely impact their overall performance and sustainability. The current study endeavored to find out the influence of financial management control on performance of hotels in Lake Region. Specifically, the study sought to determine the influence of budgeting, financial audits, cash flow analysis and financial reporting on performance of hotels in Lake Region. The study was guided by agency theory, audit expectation gap theory, liquidity preference theory and signaling theory. The study was conducted in Lake Victoria region. The study adopted a correlational research design. The 15 hotels in lake region that have earned a star rating from the Tourism Regulatory Authority made up the study's population. The study was a census study. Questionnaires with close-ended questions was used to collect primary data. Content validity was determined through consultations and discussions with the experts, academicians and the supervisor. A Cronbach Alpha method was used to determine reliability and data was analyzed using descriptive and inferential statistics with the help of Statistical Package for Social Sciences software version 26. The research used inferential statistics, namely correlation and regression analysis, to examine the null and alternative hypotheses. A Multiple Regression analysis was used to investigate the impact of variations in the independent variables on changes in the dependent variable. To assess the success of the regression model, the coefficient of determination was computed. The findings indicate that all model coefficients achieved statistical significance at a significance level of 0.05. Results showed that the relationship between budgeting, financial audits, cash flow analysis, financial reporting and performance of hotels in Lake Region is linear, positive and significant. For each unit increase in budgeting, performance increases by approximately 0.277, holding all other factors constant. A unit increase in the quality of financial audits is associated with a 0.230 increase in performance. An increase of one unit in cash flow analysis leads to a 0.323 increase in performance. Each unit increase in financial reporting contributes to a 0.224 increase in performance. The study therefore concluded that financial management control significantly affected performance of hotels in Lake Region in Kenya. The study recommended that there is need for regular reviews and adjustments to budgeting practices to adapt to changing market conditions, ensuring that the budgeting process remains relevant and effective. Management should also create a system for tracking the implementation of audit recommendations. Regular cash flow reviews should be integrated into the management processes ensuring that hotels remain resilient and responsive to market fluctuations.