Assessing Goodwill in Hotel Business Case Study: Milcofil SA. Vrancea

• Author: Dan Pauna, Luminita Maria Filip
• Pages: 398-408

European Integration - Realities and Perspectives. Proceedings 2015

398

Assessing Goodwill in Hotel Business Case Study: Milcofil SA. Vrancea

Dan Păuna1, Luminita Maria Filip2

Abstract: This study focuses on the assessment of goodwill in the hotel business, an entity which brings

together both tangible and intangible elements. Even though tangible elements are relatively easy to measure

by typical accounting methods, the intangible part (which defines the most important feature of services) is

rather difficult, if not impossible to measure. That is mainly the reason why the immateria l side, which

defines famous businesses, brings the recognition of the image, advertisement, logo, emblem, fame or, in

other words, all the elements that attract clients.

Keywords: goodwill; professional practices method; value in earning power method; updated financial flows

method

JEL Classification: D12; L25; L83; M41

1. Introduction

We shall begin this paper with a defining quote from professor Lupu Nicolae3 ―Defining (designing)

the hotel product must be done for an exactly determined segment of clients, that is the dissatisfied

ones...The sharp reduction of accommodation prices, even at a modest hotel, would rather raise

suspicion from clients. If a big and famous hotel would reduce its prices to half, it would be in danger

of remaining empty...while potential clients would still be inhibited by the hotel luxury and fame and

they will not even step inside...‖ (Lupu, 2010)

Generally, speaking about the hospitality industry, we consider a certain standard with implications on

the quality of the services offered, and the clients of the hotel ―hope that hotel will be clean,

comfortable, safe and secure. They expect to be furnished with hygienic conditions, good and sanitary

food and beverage at a reasonable price.‖ (Gonenc Guler & Yukselen, 2010)

Therefore, the defining element of this industry is the intangible part because, since it is difficult to

measure, having standardized elements for offering the service, elements which are limited in time, if

1 Senior Lecturer, PhD, Danubius University of Galati, Faculty of Economic Sciences, Romania, Address: 3 Galati Blvd,

Galati, Romania, tel: +40372 361 102, fax: +40372 361 290, Corresponding author: paunadan@univ-danubius.ro

/pauna_dan@yahoo.com

2 Senior Lecturer, PhD, Danubius University of Galati, Faculty of Economic Sciences, Romania, Address: 3 Galati Blvd,

Galati, Romania, Tel: +40372 361 102, fax: +40372 361 290, E-mail: mariacraciun@univ-danubius.ro.

3 Professor PhD. Nicolae Lupu, University of Economic Studies of Bucharest, Department o f Tourism and Geography, skills

and contributions regarding the management and technology in the field of hotels and restaurants.