Financial distress in the hospitality industry during the Covid-19 disaster

We implement the stress test methodology of the banking industry in conjunction with a Logit model of bankruptcy with parameters estimated with data from the Great Recession (2008–2013) to predict which firms would face financial distress among Spanish hospitality firms during 2020 due to the Covid-19 disaster. The predictions from both methods rely on the last accounting data available and on the expected revenue drop for 2020. Both methods coincide to predict that 25% of these firms will face a financial distress situation if revenues drop 60%. This forecast raises up to 32% of firms if revenues drop 80%. Financial distress will affect mainly small firms. Most of the firms in financial distress will face solvency problems, with total assets being insufficient to pay all debts.     

Turnaround strategy: A study of restaurant firms

This paper uses a case study approach to analyze the turnaround actions of two restaurant firms and compares them to the model of Robbins and Pearce [1992. Strategic Management Journal 9, 287–309]. The objective of this study is to scrutinize why these firms were unsuccessful in turning around and identify gaps between the firms’ actions and the empirical model of turnaround proposed by Robbins and Pearce. Two key turnaround measures, i.e., retrenchment and recovery are explored in detail and discussed in the context of the firms. The need for studying turnaround strategies is warranted as the number of hospitality firms that perish because of unsuccessful turnaround strategies is on the increase. Since turnaround strategies have not been pursued vigorously as a stream of research within the hospitality industry context, this approach would provide a framework for hospitality researchers to initiate similar future research efforts, which in turn would help the industry cope with turnaround.     

The real estate risk of hospitality firms: Examining stock-return sensitivity to property values

The value of a hospitality firm is often believed to be dependent on the market price of the properties they own. However, the core business of a hospitality firm is the production of products and services. Since the real estate assets are depreciated throughout their useful life, short-term covariance of firm value with real estate prices seems implausible. Using a two-factor model, the current study examined the real estate exposure of US hospitality firms through daily stock return data from 2005 to 2009. Results indicate that the majority (88%) of the hospitality firms were exposed to real estate risk at some point during the sample period, while the second-stage analysis of real estate betas suggests that exposure is conditional on the financial status of the hospitality firm. Implications and suggestions for future research are presented with the findings of the study.     

The role of business model innovation in the hospitality industry during the COVID-19 crisis

The hospitality industry worldwide is among the hardest-hit industries from the COVID-19 lockdowns. Initial theoretical and practical observations in the hospitality industry indicate that business model innovation (BMI) might be a solution to recover from and successfully cope with the COVID-19 crisis. Interestingly, some firms in the hospitality industry already started to successfully adapt their business models. This study explores the why and how of these successful recovery attempts through BMI by conducting a multiple case study of six hospitality firms in Austria. We rely on interview data from managers together with one of their main stammgasts for each case, which we triangulate with secondary data for the analysis. Findings show that BMI is applied during and after the crisis to create new revenue streams and secure a higher level of liquidity, with an important role of stammgasts.     

Positioning analysis for hospitality firms

The positioning of hospitality firms in the market-place is an essential component of effective marketing in today's highly competitive environment. Essential to optimal positioning is a knowledge of the importance and perceived deliverability of benefits to the consumer for both the firm and its competition. This paper describes a methodology for the determination and analysis of those benefits that can be utilized most effectively by a hospitality firm and that has practical implications for firms of any size.     

An importance–performance analysis of sustainability factors for long-term strategy planning in Slovenian hotels

This paper explores the potential role of economic, environmental and social reporting in long-term strategy planning in the hospitality industry. The context of study is Slovenia. Following the development of a set of “sustainability” indicators, hospitality managers were asked to rate the importance of each indicator to sustainable operations and the performance of their firms in implementing management actions. Seven hotel performance factors were established across the triple bottom line. Using importance–performance analysis (IPA), key issues are identified as requiring the attention of stakeholders to support the sustainable development of Slovenia's hospitality industry. For managers, the 10 most important indicators include those related to economic performance, customer relationship and cost saving environmental activities: performance here, and in marketing, was perceived as poor. In contrast, actions taken to increase environmental awareness, and improve relationships with employees are seen by managers as less important, and even as possible overkills. Community relationships are seen as of low importance and where the industry performs relatively poorly. A major recommendation is that Slovenian hotel managers should focus on improving their economic performance: neglecting this could threaten hotels’ long-term survival. IPA analysis is shown as applicable to strategy making for sustainable development in hospitality industry contexts worldwide.     

The Determinant of the Hospitality Industry's Unsystematic Risk: A Comparison Between Hotel and Restaurant Firms

ABSTRACT

Unsystematic risk is accepted as an important factor in stock valuation. Despite the importance, little has been done to study the relationship of unsystematic risk to stock values in the hospitality industry. This study attempted to advance the understanding of financial variables that could be related to unsystematic risk of hospitality firms. Regression models were developed for hotel and restaurant firms, using unsystematic risk as the dependent variable and financial variables as independent variables. The major findings of this study indicate: 1) more profitable hospitality companies have less unsystematic risk, 2) reducing reliance on debt financing could reduce unsystematic risk, 3) the positive relationship between operating leverage and unsystematic risk, suggesting that decreasing operating leverage could mitigate the stock price volatility of hospitality firms, and 4) large hotel and restaurant firms have less unsystematic risk than small firms. This study should help management of hospitality firms incorporate effects of shareholder expectations into their operational decision making as an integral part of long-range financial planning.     

The last feather-bedded industry?: Government, politics and the hospitality industry during and after the 1992 General Election

This paper examines political debate and rhetoric attendant on those issues perceived as germane to the hospitality sector by industry operators at the time of the 1992 UK General Election. By extensive use of secondary, mainly journalistic, sources, an analysis of such issues is undertaken, located in the specific context of the various conservative ideologies that are shown to be associated with the hospitality industry. The paper's main theme is that far from endorsing a commitment to the agenda of the Conservative government, the hospitality industry's conservatism reflects more a form of special pleading comprising demand for particular economic privileges based on a form of protectionist corporatism. It is concluded that rather than representing a model of the vanguard of free-market culture, the hospitality industry in the UK represents the last gasp of conservative corporatism, bent on the maintenance of economic privilege rather than offering a commitment to economic liberalism.     

Exploring home-based accommodation operators' responses to Covid-19: Implications of untact hospitality adoption

Unlike the mainstream research conducted on the COVID-19 pandemic and its impacts on both large-scale tourism and hospitality firms, and also at the destination level, the current study focused on home-based accommodations in Iran which have experienced rapid development throughout the country. In-depth interviews with a number (n = 45) of such accommodation operators revealed that due to their perceived high vulnerability to the pandemic and self-protection, they adopted “untact hospitality”, thereby decreasing their direct interaction with guests. Looking through the lens of Protection Motivation Theory, four main themes were explored: motivations to work in the hospitality industry; local accommodation operators' perception of threat; coping appraisal; and protection behavior intention. The results revealed that many local ventures were unable to survive, leading to the bankruptcy of such units throughout the country. With few exceptions, the public sector's responses to the pandemic, and the hospitality sector's measures, were generally unsuccessful in managing the health crisis. The current study contributes to the risk, crisis preparation and crisis management of hospitality organizations at the local level in the context of their health protection motivation behavior.     

Capital structure in the hospitality industry: The role of the asset-light and fee-oriented strategy

An asset-light and fee-oriented strategy (ALFO), which reduces risk and facilitates firm growth with minimum capital investment, has increasingly gained attention from industry practitioners and academic scholars alike, especially in the service sector like the hospitality industry. We empirically examine how ALFO is employed and how it is related to the capital structure, i.e. the proportion of debt and equity financing, in hospitality firms. Using a sample of 982 firm-year observations over the period 2002–2016, we find that ALFO is widely used by the hospitality industry, and as expected, the fee-income ratio and the degree of franchising have increased, while asset tangibility and capital intensity have decreased. Interestingly, although ALFO is positively related to long-term debt ratios of hospitality firms, our sub-sector analyses indicate that the relationship is only significant in the restaurant sector and not in the hotel sector. Our study contributes to the literature by identifying an important industry-specific variable that affects the capital structure of hospitality firms.     

Economic policy uncertainty and corporate investment: Evidence from the U.S. hospitality industry

The study of how uncertainty affects hospitality firms’ decisions is gaining attention in recent years. We examine the effect of Economic Policy Uncertainty (EPU) on the investment policy of a sample of 305 hospitality companies in the U.S. for the period 2001–2018. Applying generalized methods of moments (GMM) technique, we find that investment policies in hospitality companies are negatively affected by EPU. Panel quantile estimations reveal that the effect of EPU on corporate investment is only relevant for companies in the lower quantile of capital expenditures ratio. Our paper also provides policy implications to related parties.     

A conceptual framework of the service delivery system design for hospitality firms in the (post-)viral world: The role of service robots

This study aims to develop a conceptual framework of the service delivery system design for hospitality firms in the (post-)viral world. Several theoretical approaches such as resource-based view, value chain analysis, stakeholder theory, PESTEL analysis, positioning strategy, and service delivery system design were adopted. The paper identified three service delivery system designs (robotic, human-based, and mixed) and analyses their requirements, advantages, disadvantages, and potential target markets. According to the suggested model, hospitality firms need first to explore the expectations of tourists. Then comes the analysis phase (based on a holistic perspective, and consisting of RBV, Value chain, Stakeholder, and PESTEL analyses), which helps hospitality firms to identify how they should differentiate and position themselves in the market. Following, companies decide on what kind of service delivery system they should offer to their target customers, and position themselves in the market according to the chosen system.     

The asset-light business model and firm performance in complex and dynamic environments: The dynamic capabilities view

Although academic research examining the effects of the asset-light business model continues to grow in the tourism and hospitality literature, the extant studies lack comprehensive theoretical foundations to develop and establish clear quantitative models of analysis. Inconsistent findings from these studies call into question the issue of their exploratory nature. Using the dynamic capabilities view, this study provides a solid conceptual framework that recognizes the asset-light business model as an industry-specific dynamic capability for lodging firms. Furthermore, this study extends recent theoretical accounts on the moderating role of environments in the dynamic capabilities-performance relationship by focusing on the service-oriented and cyclical nature of the tourism and hospitality industry. Incorporating industry-specific performance measures, the current study suggests an alternative approach to the analysis of performance of a lodging firm. The findings also provide important implications to help lodging owners, managers, and investors to strategically cope with complex and dynamic environments.     

Influence of institutional economics on firm birth and death: A comparative analysis of hospitality and other industries

This paper investigates how public policies, such as taxes and regulations influence firm formation (birth) and closure (death) in the hospitality and other industries in the United States (US), using an institutional economics approach and the dimensions of the Economic Freedom of North America (EFNA) index. The literature has been scant when it comes to examining the effects of policies of formal institutions on firms’ birth and death in the hospitality industry, and whether these effects in hospitality differ from those of other sectors. The study uses panel data from government sources and the EFNA dimensions and applies cross-sectional dependence and unit root tests, followed by a panel generalized least square approach for the analysis. Our findings show that components of economic freedom have varying effects on firms’ birth and death. The study provides practical contributions for policymakers and managers by improving the understanding of firm births and deaths in the US.     

Financial features of dividend-paying firms in the hospitality industry: A logistic regression analysis

The purpose of this study was to identify the financial features that distinguish dividend-paying firms from non-dividend-paying companies in the U.S. hospitality industry. The logistic regression model shows that firm size and profitability are significant drivers of dividend payout, whereas investment opportunities deter dividend payout. In the U.S. hospitality industry, larger hospitality firms with higher profitability but fewer investment opportunities are more likely to pay out dividends to their shareholders.     

A multilevel investigation of the cascading effect of entrepreneurial leadership on employee creativity: Evidence from Chinese hospitality and tourism firms

This study aims to elucidate the cascading effect of entrepreneurial leadership on fostering employee creativity in hospitality and tourism firms. Drawing upon multiple theories (e.g., the affective events theory and conservation of resources theory) and utilizing a multilevel mediation model, this study predicts and examines the cross-level indirect relationship between entrepreneurial leadership and employee creativity, which is sequentially transmitted through employees’ surface acting and work-related flow. Based on a 2-wave longitudinal design, survey data were obtained from multiple sources consisting of 47 leaders and 352 employees in Chinese hospitality and tourism firms. Multilevel structural equation modeling (MSEM) analysis provides empirical support for the cross-level mediation model. This study is among the first to provide empirical evidence of the cross-level effect of entrepreneurial leadership on workplace creativity via surface acting and work-related flow in the service industry, which enriches the leadership literature in the tourism discipline.     

EPU and financial performance in the hospitality and tourism industry: Moderating effect of CSR,institutional ownership and cash holding

The purpose of this study is to examine the effect of policy-related economic uncertainty (EPU) on the financial performance of hospitality and tourism companies. More precisely, the study aims at revealing how the performance of hospitality and tourism companies is affected at times of increasing EPU, and the role of corporate social responsibility (CSR) engagement, institutional ownership and cash holding to moderate this proposed relationship. The study’s sample includes a total of 113 companies from the hotel, restaurant and airline industries for the period 2001-2018. Hypotheses are tested via two-way fixed-effect regression. The study finds that increasing EPU is detrimental to firm performance presented in declining Tobin’s Q. However, the magnitude of this negative effect on firm performance becomes less pronounced as firms engage more in CSR, have larger fraction of institutional ownership and hold larger cash and cash equivalents     

Wage differences in the hospitality sector

The article examines the origin of differences between wages in the hospitality sector and the rest of the private sector in Spain. The evidence obtained for the 2002–2010 period shows that the wage disadvantage of hospitality presents an increasing profile along the wage distribution so that it is particularly relevant for those earning comparatively higher salaries. In contrast with other low-wage sectors, lower wages in hospitality are explained almost entirely by the specific characteristics of its workers and jobs (particularly their lower educational qualifications and their higher presence in low-skilled occupations), and not by the existence of lower rewards to those characteristics. Highly qualified individuals are however an exception since they suffer a wage penalty for working in the sector. Furthermore the analysis shows that pay inequality is substantially lower in the hospitality sector and that it is not due to the relative characteristics of its workers and jobs.     

The contributions of economics to hospitality literature: A content analysis of hospitality and tourism journals

This paper aimed to develop a concrete understanding of economics topics and methodologies that have been applied to hospitality research and to suggest areas for further research. Content analysis of 292 full-length articles was performed. The results showed that the contributions of economics to hospitality literature were largely empirical and microeconomics-related. Most of the research topics focused on market analysis, which involves demand and supply modelling and price determinants, followed by performance analysis, involving efficiency and productivity studies. Limited contributions of macroeconomic topics to hospitality were determined, highlighting the lack of studies on the impact of government or public policies on the hospitality industry. Moreover, the application of game theory to market structures was found to be limited, creating a vacuum in terms of understanding the competitive and cooperative behaviours of hospitality firms. As a contribution to the literature, the study provides suggestions for future research.     

Gender diversity in hospitality and tourism top management teams: A systematic review of the last 10 years

Due to women still accounting for less than a quarter of hospitality and tourism executive-level positions, the purpose of this paper was to identify antecedents to and outcomes of gender diverse hospitality and tourism top management teams, describe potential mediators and moderators to these relationships, and provide directions for future research. A systematic review of gender diversity in hospitality and tourism top management teams (TMTs) was conducted between the years 2010 and 2020, resulting in 26 articles used for the thematic analysis. Antecedents, outcomes, mediators, and moderators of gender diverse hospitality and tourism TMTs were identified. The results indicated female role models, organizational structure, and organizational support as antecedents, while financial performance, business growth, and human resource outcomes were consequences. The resource advantage theory is proposed as an explanation for each of these relationships. This study fills a gap in previous literature by conducting a review of gender diversity, identifying critical gaps, and proposing an overarching theory.