The hospitality industry is a somewhat enigmatic sector for theft and fraud and, consequently, for indicators of loss, due to the variety of businesses that it encompasses and the diverse physical layout and employee mix.
From souvenir shops to outfitters, from hotels and B&Bs to pioneer museums and eco-tours, from ethnic celebrations to interactive venues, the industry is unique, presenting unique theft and fraud concerns. Many are community-owned and operated ventures, managed by volunteers.
Many of the employees are entry level, young and relatively poorly paid, yet vested with considerable responsibility. Small size of operation and small employee base creates opportunities, but employees frequently are involved in less sophisticated thefts, due to the low dollar value of many transactions and the lack of complexity in the operations.
Cash transactions, remote
For outfitters and tours, interactive sites and transportation, the use of remote payments, where customers do not reserve in advance and may participate or use the services spontaneously, the opportunity for pocketing cash transactions increases. Often, these extra customers will consume goods, or require extra fuel, or require outfitting supplies. Using yields analyses for every item in your supply closet, such as meal packages, bait or other consumables will reveal indicators of per-unit overconsumption and possible theft.
Phone transactions
Check your phone logs weekly, to match against bookings. Conduct follow-up calls to clients on the phone list ostensibly to determine customer satisfaction to verify legitimacy of the call and if the customer used services not recorded. The call records provide indicators of potential discrete, unregistered customers that an employee may have received payment from on the side.
Hotel supply & maintenance rooms
Check staff-use rooms, from staff locker areas to laundry and storage facilities, randomly and frequently, to ensure that staff are not hoarding items for later theft. In hotels, this is a common occurrence.
Garbage, recycling & trash
In every business, staff who steal often use these facilities to conceal items that are later discarded outside of the operation for later retrieval. Check regularly and discretely.
Inaccurate or incomplete client records
Match supplies used to paid-for items for clients, to ensure proper prices and quantities are recorded. Where you detect that records are chronically incomplete or inaccurate, monitor the employee responsible.
Night audit
In hotels, the most common theft occurs when night front desk staff discount rooms for cash or provide rooms without records of sales. In these instances, the front desk staff may clean the room themselves before cleaning and room staff come on shift. Match cleaner records to rooms rented, rates charged for upgraded rooms and cameras to see if front staff are disappearing for periods of time that are unexplained in early morning.
Vending machines
Match records of purchase logs to stocking logs of each machine to revenue generated to ensure that all items purchased are sold and priced correctly.
Extended parking
Particularly in cities where hotel visitors are staying overnight to travel elsewhere by plane or cruise ship, hotels may offer extended parking for free if the customer spends the night. Innovative front desk personnel may receive payment for extended parking from customers who do not purchase a nightly stay from the hotel. Conduct regular checks of the lot to ensure that there are not extra vehicles staying for lengthy periods and maintain a record of all vehicles who are authorized to park beyond the length of their hotel stay.
Sundries
Staff may assume that a few coins here and there will not be missed. We have found that, frequently, employees will not record the purchase of a chocolate bar, a toothbrush, a soft drink or a newspaper. Without proper inventory records, a business can significant loss.
One employee regularly helped himself to a pop and a bag of chips on shift. Total value: less than $5. However, over the course of a year, the losses amounted to over $1,000. With eight staff, total loss could have reached $8,000 per year, yet he felt that his “few pennies” would not be missed and were unimportant.
Another worker routinely failed to record one out of every two newspapers purchased. While the sale of actual newspapers is dwindling, magazine sales still remain popular. She admitted to taking over $3,500 per year, just in newspapers and magazine sales. (She also confessed to an additional $14,000 in theft.)
Souvenirs and tourist items
While few employees of these shops see value in stealing the actual items, they often overcharge, give improper change, fail to ring up an item (opting to accept cash without a receipt). Many times, the employees focus on very popular items, since their volume of sales will absorb infrequent fraudulent transactions more easily. This is why perpetual inventory and frequent counts are essential. The counts should never be conducted by the same staff but rotated through the employee base to reduce the risk of an employee covering their tracks or colluding with another employee to alter inventory counts.
Management theft & fraud
One convenience store of a large chain, located in a tourist town, had an eight percent inventory shrinkage. Even for convenience stores, this is a very significant loss. While it still operated profitably, it should have had experienced net margins of more than 15%. The manager, who operated with little oversight, was adjusting transactions daily, including both receipts and purchases.
Another isolated store with low supervision by corporate offices experienced consecutive years of inventory overages. This should never occur, but the company was so thrilled with this unexplained windfall that they promoted him to district supervisor. He was fired two years later when the new manager’s annual inventory count in year one showed a shortfall of nearly 20%. The first manager simply had been deliberately overcounting inventory, padding the counts where needed.