HUHDS Revenue Streams

I. Introduction

To understand the revenue streams that influence Harvard University Hospitality
and Dining Services' (HUHDS') cost decisions, we examine changes to the total
Harvard University operating revenue and the individual Harvard student's board
rate. We determine that, though the endowment has begun to recover, HUHDS'
austerity measures have remained in place: reductions in the board rate have
been disproportionately severe, with detrimental impact on HUHDS' operations,
quality of food purchased, and student life
.

II. Objective

In 2009, HUHDS employees were hit with a $900 reduction in annual average individual income, caused by reduced hours. Additionally, the quality of food purchased has declined and become less sustainable. We have analyzed data on recent changes to Harvard University operating revenues and HUHDS' revenue streams to assess the continued need for these cost-cutting measures and the potential for Unite Here to utilize this information as part of an overall negotiating strategy.

III. Harvard University operating revenues decline

  • University operating revenues declined between FY2009 and FY2010, from $3.81 billion to $3.72 billion, a drop of 2.17%. This was a significant change as revenues had risen by 7.98% annually on average over the previous 4 years.
  • The fall in revenues was due in large part to the financial crisis. In particular, the University Endowment declined in value by 27.3% between 2008 and 2009, a loss of over $10 billion in capital.
  • The contribution to operating revenues from the endowment (and other investment income sources) declined by 6.85% in 2009.
  • Student income and government support rose by 4.94% and 8.85% over this period respectively.
  • Additionally, gifts for current use (as opposed to gifts to the endowment) declined by 14.88%.
  • Other income- rentals, parking, publications, royalties- declined by 5.01%.
  • Had revenues followed their 2005-2009 trend of 8% annual growth, they would have topped $4.1 billion in 2010. Instead, they declined to $3.7 billion, an effective shortfall of $386 million.
  • Austerity measures were taken across the University. The Faculty of Arts and Sciences (FAS) set a goal of reducing $220 million over 2 years, around a quarter of the University-wide shortfall in each year.[1]

Text Box: Figure 1.  Harvard's financial situation

IV. Changes to HUHDS' revenues and the board rate

  • HUHDS has three main revenue streams:

Board (a component of student tuition),

Crimson Catering,

Restaurant operations.

HUHDS is self-sustaining. It does not receive direct payouts from the endowment (tuition, room and board covered by financial aid can come from the endowment). class=MsoFootnoteReference>[2]

  • The mix of room and board within tuition masked the change in relative significance of each since 2009.
  • Room rents increased by 19.6% from 2008 to 2009. This increase was far out of line with the usual annual increase in room rents of 3-4%.
  • In this same period, board dropped 7.51%, out of line with usual annual increase of 3-5%.
  • Based on this data, we hypothesize that Harvard took advantage of temporarily necessary austerity measures to permanently reduce funds available to HUHDS.



 


Change in Board


Change in Room


Board as %


Room as %


2007


---


---


44.87%


55.13%


2008


4.53%


3.50%


45.12%


54.88%


2009


-7.51%


19.60%


38.87%


61.13%


2010


3.80%


3.82%


38.86%


61.14%

Text Box: Figure 2. In order to take advantage of cuts made in HUHDS’ operations, the university lowered the board rate significantly while increasing the rate of room rents as paid by undergraduates.

V. Impact of cuts in board rate

  • Had the board to room ratio remained constant, the board rate would have been $5,335 in 2009.
  • Assuming HUHDS receives board from approximately 6,000 undergraduates, in 2009, the diversion of funds from board to room reduced HUHDS' annual revenues by $4,363,200. If similar diversions of funds occurred at graduate schools, this reduction would likely be even larger.
  • HUHDS dealt with this permanent reduction in revenues through cost-cutting measures that detrimentally impacted employee lifestyles, sustainability of food served, and quality of food.

· FY09-FY10, total dining hall workers hours were reduced by 50,729, a decrease of 7.33%. This led to an overall annual wage reduction of $549,779, a decrease of around $1.3 million below the expected wages given previous year increases.

·Cutting hot breakfast in FY09 reduced costs by $900,000 per year (a combination of reduced food purchases and reduced hours).[3]

·HUHDS food purchasing has shifted toward pre-processed and less local food, with the following impacts [4]

      • Reduction in worker hours
      • Less sustainable food with higher environmental impact (emissions from transportation, local impacts from unsustainable production practices)
      • Lower quality food, as evidenced by reduced consumption

·Food prices have increased significantly in the last year, by 2.9% between March 2010 and March 2011.[5]

The reductions in HUHDS' revenue streams have noticeably reduced the quality of HUHDS' operations from the perspective of workers and consumers.

VI. Conclusions

HUHDS and the rest of the University took necessary cost-cutting measures to respond to the financial crisis. Now that the endowment is on the way to recovery, these cost-cutting measures should be scaled back so HUHDS can return to its mission of providing high-quality, sustainable food to its clientele while maintaining a safe, healthy, sustainable working environment for its employees.



References

[1]
Faced with Deficit, FAS to Restructure, Harvard Crimson, April 15, 2009

[2]Ted Mayer, Lecture to class of Environmental Science and Public Policy 10, Spring 2008

[3]HUDS to Trim Breakfasts, Harvard Crimson, May 13, 2009.

[4] Dining Hall Workers Survey

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