Capital structure in the hospitality industry: The role of the asset-light and fee-oriented strategy |
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| Institution: | 1. Department of Hospitality & Tourism Management, Pamplin College of Business, Virginia Tech, 342 Wallace Hall, 295 West Campus Drive, Blacksburg, VA 24061-0429, United States;2. Department of Hospitality & Tourism Management, Pamplin College of Business, Virginia Tech, 363B Wallace Hall, 295 West Campus Drive, Blacksburg, VA 24061-0429, United States;1. Dpt. of Nautical Sciences and Marine Systems Engineering, University of the Basque Country, UPV/EHU, Portugalete, Bizkaia, Spain;2. Dpt. of Applied Mathematics, Faculty of Engineering of Bilbao, UPV/EHU, Tecnalia Research & Innovation, Meteorology Unit, Euskalmet, Agency Basque of Meteorology, Spain;1. Department of Marketing, College of Business, Florida Atlantic University, 777 Glades Road, Boca Raton, FL, 33431, USA;2. William F. Harrah College of Hospitality, University of Nevada, Las Vegas, 4505 S. Maryland Pkwy, Las Vegas, NV, 89154-6013, USA;1. Institute for Tourism Studies (IFT), Macao, Rm I-127, I-Building, Colina de Mong-ha, Macao S.A.R., China;2. School of Hotel, Restaurant and Tourism Management, College of Hospitality, Retail and Sport Management, University of South Carolina, Carolina Coliseum, Room 1009, USA;1. School of Accounting, Nanjing Audit University, 86 West Yushan Road, Nanjing, China;2. School of Management, Harbin Institute of Technology, 92 West Dazhi Street, Harbin, China;3. School of Hotel & Tourism Management, The Hong Kong Polytechnic University, 17 Science Museum Road, TST-East, Kowloon, Hong Kong Special Administrative Region;1. Department of Applied Economic Analysis, University of Alicante, Campus San Vicente del Raspeig, 03080, Alicante, Spain;2. Department of Economics, University of Alcalá, Spain |
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| Abstract: | 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. |
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| Keywords: | Asset tangibility Capital intensity Fee-income ratio Degree of franchising Capital structure Hospitality industry |
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