Deck 11: Credit and the City Ledger

Question 1

Debit cards have not gained in popularity because the typical user (the average hotel guest) has little or no knowledge of accounting's debits and credits.

Answer 1

False

Question 2

The city ledger came into being when credit cards were introduced, about 1950.

Answer 2

False

Question 3

Assume a sales manager had to choose between extending credit to a risky client for a cocktail reception and banquet or a corresponding dollar amount in hotel room sales. All things equal, it would be better to choose the hotel room sales, because food and beverage sales have a lower profit margin and cost the hotel more per dollar of revenue than room sales.

Answer 3

True

Question 4

To improve credit monitoring, walk-in guests are usually flagged with a code identifying them as a walk-in guest, as opposed to a guest whose reservation provides the hotel with a track record.

Question 5

Split folios (A and B folios) are the standard method of handling front-office billing for guests who "pay"for their rooms with frequent-guest points or due bills.

Question 6

Credit-card transactions cost the merchant/hotel which of the following fees?

A) Authorization fees
B) Discount fees
C) Interchange fees
D) Chargeback fees
E) All of the above

Question 7

The "________ Fee Party,"in which restaurants boycotted American Express over excessive fees, took place in:

A) Philadelphia
B) Montreal
C) Los Angeles
D) Boston
E) Miami

Question 8

Which of the following is NOT a category normally found in the City Ledger?

A) Taxes payable
B) Banquet charges
C) Late charges
D) Travel agents
E) None of the above; that is, they are all city-ledger categories

Question 9

EFT is shorthand for:

A) Equal and Fair Treatment, (federal requirement for cardholders)
B) Every First Time [Guest], (part of frequent-guest programs)
C) Electronic Funds Transfer, (for moving money electronically)
D) Each Frequent Traveler, (another reference to frequent-guest programs)
E) Both B and D

Question 10

Which of the following is NOT a term used with regard to the practice of trading room nights for advertising or for products:

A) Due bills
B) Reciprocal trade agreements
C) Trade outs
D) Room night trading
E) Trade advertising contracts

Question 11

For this short answer, select from either option A or option B:A: List 4 precautions that a guest-service agent must take when a credit card is offered in payment.Or chooseB: List 4 issues, other than the creditworthiness of the potential guest, that a sales manager might consider when extending credit to a group.

Question 12

Accounts receivable are customers who have not yet paid for the services that they have already received.

Question 13

Accounts payable are debts the hotel owes for services received but not yet paid for.

Question 14

Tracking city-ledger receivables is one duty of guest-service agents.

Question 15

Ledger, as in "city-ledger,"refers to the large book, the ledger, in which records are maintained by accountants.

Question 16

Credit-card companies, which owe the hotel for their clients' accounts, are city-ledger accounts receivable.

Question 17

Hotel companies use credit cards to track and evaluate the quality of their guests' visits.

Question 18

Visa and MasterCard are close allies in the card-card battles.

Question 19

"Float"is the delay between purchases made on credit and the ultimate payment for those purchases.

Question 20

T&E card companies, of which Visa is one, charge merchants a higher fee than do bank-card companies such as American Express.

Question 21

Affinity cards disappeared along with the private-label cards that were once popular among major gasoline companies.

Question 22

Hotel chains often co-brand with a credit card; so one might see a Chase Bank's Visa card with a Marriott Hotel imprint.

Question 23

Hotels give special "extras"to users of co-branded cards, similar to the specials that hotels grant to members of their frequent-guest programs.

Question 24

A non-registered guest who charges his bar tab has that charge posted to a front-office folio called "bar charges."

Question 25

Credit-card companies establish credit "floors,"- really credit ceilings; amounts above which the card company will not guarantee the card.

Question 26

For nonpayment, hotels have the legal right to seize guests' luggage and/or lock-out the guests, denying them access to the room.

Question 27

To avoid high credit-card fees, hotel personnel try to have guests settle charges with personal checks rather than credit-card payments.

Question 28

The amount of due bills issued by the hotel industry reflects the status of the current economic cycle; more due bills in poor times; fewer in good times.

Question 29

Electronic processing has all but eliminated merchant fees.

Question 30

The credit-card business has grown so complex that many middlemen, the text calls them third-party intermediaries, have appeared to handle the volume.

Question 31

Credit-card companies work in harmony so closely that it is often difficult to distinguish one from the other.

Question 32

The hotel industry's traditional formula of one comp room per 15 paid room nights has long been used when negotiating group business.

Question 33

"G"and "I"are used extensively in split-folio billing where "G"folios belong to the group (and the group pays these charges) and "I"folios, which accumulate individual charges, for which each guest is responsible.

Question 34

Unused services ("breakage") benefits the wholesaler of tour packages and benefits the hotel offering IT packages.

Question 35

Hotels that sell IT packages account for the total dollars collected by assigning 66.6% of the package price to room income; 23.4% to food income; 5% to recreational income and 5% to the bar.

Question 36

Like mom-and-pop roadside motels, travel agencies have disappeared so hotels no longer count them as a viable source of business.

Question 37

Smart cards, which store a great deal of personal information, generate more controversy from critics than do credit- or debit-cards.

Question 38

A late charge is one posted to the folio after the "close-out hour"has passed, so it appears under the date of the following day.

Question 39

Sometimes, small late charges are erased from a guest's folio by means of an allowance, which creates a permanent record of the transaction.

Question 40

E-folios - Error folios - are like late charges, both make guests angry over what appears to be sloppy front-office recordkeeping.

Question 41

Master accounts are front-office folios but the "guests"are usually organizations or companies, rather than individuals.

Question 42

Now that the courts have ruled it to be discriminatory, yield management systems can no longer turn away travel-agency business during periods of high occupancy.

Question 43

Airline crews, which may layover between flights, are not city-ledger accounts to a local hotel because the guests originated in another city.

Question 44

Their very name indicates that many delinquent accounts are written off as bad debts.

Question 45

There is no perfect credit policy: too stringent a policy and business is lost; too easy a policy and income is lost.

Question 46

If guests settle their debts with debit cards (electronic fund transfers, EFTs), their balances are carried (awaiting payment) in the city ledger.

Question 47

Open book credit simply means that the guest's signature is all the hotel is using to grant credit; but that's done only after the guest's credit status has been checked.

Question 48

Some city-ledger accounts are temporary (a wedding party, for example) and some accounts are permanent (a credit-card company, for example).

Question 49

Passing bad checks at a hotel is a criminal offense under state laws.

Question 50

Many due bills are negotiable, traded among persons and businesses other than the hotel and the original recipient.

Question 51

Like all retailers, hotels do not favor electronic fund transfers because they increase losses from dishonest employees.

Question 52

Commissions paid to travel agencies, usually at a rate of 10%, are considered an operating expense, similar to the expense of fees paid to a credit-card company.

Question 53

Reservation deposits usually cover the rate for one night.

Question 54

Travel agencies' corporate credit cards have minimized much of the conflict over payment between travel agencies and distant hotels.

Question 55

Business between foreign travel agencies and domestic hotels works well because of the International standardization of paperwork created by the IHA (International Hotel Association).

Question 56

If "circa"means "about that time,"a historical outline of credit would include: (1) Colonial innkeepers issue tokens; (2) Credit-cards appear, circa 1950; (3) Debit cards gain ground, circa 1970; (4) Smart cards are talked about more and more often, circa 2010.

Question 57

The concept behind hotel due bills has application to which other service industry or industries:

A) Food retailing
B) Banking
C) Advertising
D) Insurance
E) All of the above

Question 58

Which, if any, of the following is accurate …Collection agencies:

A) Split recoveries 75% for the agency and 25% for the hotel
B) Wait and wait because collections are more likely the older the debt
C) Have special techniques not available to innkeepers or their attorneys
D) Are successful, in part, because debtors knows creditors are getting tough
E) All of the above

Question 59

Which of the following outlays is [are] an operating expense?

A) Monthly payment to lobby-store owners for collections made on guest folios
B) Individual payment to a guest who cancels a pre-paid reservation
C) Quarterly payment of sales taxes to the state
D) Monthly payment of credit-card fees paid to MasterCard
E) Both A and C

Question 60

Chargebacks from credit-card companies occur because of:

A) Unreadable data transmission
B) Guest complaints
C) Failure of guests to pay the credit-card company
D) Clerical errors
E) All of the above

Question 61

Which of the city-ledger categories is (are) classified as an account receivable?

A) Advanced (cash) deposit from a guest
B) Prepaid travel agency account
C) Due Bill
D) Credit-card company
E) All of the above

Question 62

Guests can access their folios through which means:

A) In-room TV sets
B) Lobby kiosks
C) E-folios
D) FGPs
E) All of the above except D

Question 63

Which of the following terms is out of place in the group?

A) Frequent-guest Programs
B) Reciprocal Trade Agreements
C) Trade Advertising Contracts
D) Due Bills
E) None of these; they all belong to the same set

Question 64

Which of the following is NOT part of the delinquent division of the city-ledger:

A) Skippers
B) Executive accounts
C) Large late charges
D) Bounced checks
E) None of these; that is, they are all likely to be written off as bad debts

Question 65

Which of the following impacts on a hotel's decision to extend credit to an organization?

A) In-season versus off-season
B) Variable cost of the item (i.e., rooms versus food)
C) Level of hotel occupancy
D) Hotel's own ability to borrow
E) All of the above

Question 66

Hotels present guests with their bills (folios) when:

A) Immediately, for paid-in-advance guests
B) Weekly
C) The guest checks out
D) The folio reaches a pre-determined amount
E) All of the above

Question 67

Because walk-in guests represent a higher credit risk than guests with reservations,walk-ins are flagged with what symbol?

A) OS
B) SPATT
C) NR
D) WI
E) All of the above except B

Question 68

Which of the following is an abbreviation for a credit card type?

A) T/A
B) MCO
C) T&E
D) FGP
E) None of the above are credit-card issuers

Question 69

Hotels (try to) bill within three days for which of the following city-ledger accounts?

A) Speedy check-out
B) Master accounts
C) Banquet charges
D) Open credit
E) All of the above