The effect of idiosyncratic price movements on short- and long-run performance of hotels

It is a common belief that businesses performance should not be evaluated by immediate fiscal returns, but rather based on an extended time horizon. While the literature implies that pricing decisions may exert lagged as well as contemporaneous effects on performance, a limited number of empirical studies have focused on such effects. The current study investigates effects of idiosyncratic price movements on short-run and long-run hotel performance, where idiosyncratic price movements refer to the changes in individual hotels’ room rates unexplained by price competition, product differentiation, and market conditions. By analyzing spatial panel data from the Houston lodging market between 2005 and 2014, we find that idiosyncratic price movements enhance hotel performance in the short-run and that adverse effects followed in the long-run. Findings of the study and implications for practitioners are discussed along with suggestions for future research.     

The relationship between purpose of performance appraisal and psychological contract: Generational differences as a moderator

This study aims to explore the relationship between performance appraisal and psychological contract (PC) from the perspective of U.S. hotel employees, as perceived by different generational cohorts. The current study also examines the moderating role of generational difference on the relationship between perceived performance appraisal purpose (PAP) and hotel employees’ PC. A sample of 230 full time frontline U.S.-based hotel employees was employed to investigate these relationships. Hierarchical multiple regressions were used for data analysis and the results indicated that both administrative and developmental PAP were positively associated with PC. The positive relationship between administrative PAP and PC was significantly strengthened for Generation Y employees than for Baby Boomers and Generation Xers. There was no significant moderation effect of generational difference on the positive relationship between developmental PAP and hotel employees’ PC. The research recommended HR management practices related to designing performance appraisal systems for diverse workplace in U.S.-based hotels.     

How do hotel managers react to rating fluctuation?

Rating fluctuation is inevitable for hotels listed on hotel booking platforms, which induces potential consumers’ perception of uncertainty and risk. Managerial response is expected to be effective in enhancing the interaction between hotels and consumers. However, how hotel managers react to rating fluctuation remains unclear. In order to fill this gap in the literature, we collect customer reviews and managerial responses from a leading hotel booking platform and build a panel dataset (hotel*month). The empirical results suggest that (1) rating fluctuation induces more managerial responses and requires more response time; (2) upscale hotels are more likely to conduct frequent and timely responses when facing rating fluctuation; and (3) hotels tend to respond more frequent and timely once rating fluctuation is observed by a larger audience. This study concludes by presenting theoretical contributions to the literature and practical implications for operators of hotel booking platforms and hotel managers.     

Modelling growth and revenue for Swedish hotel establishments

This paper provides first estimates of the determinants of output growth of Swedish hotels based on establishment data. Growth of overnight stays is modelled as a function of initial size, age, type of accommodation, location and hotel prices measured as average revenues per guest nights. The empirical model accounts for potential endogeneity of hotel prices through the two-stage least absolute deviation model (2SLAD) and the instrumental variable quantile regression method. 2SLAD estimates show a positive and significant relationship between hotel prices and subsequent growth. The relationship is nonlinear with a decreasing impact as the price level increases. Growth of establishments is significantly higher for smaller and younger hotels. An important result is that city hotels, in comparison to tourist and other hotels – which are mainly located outside urban areas (in the mountains and at the sea) – exhibit significantly higher growth rates with a gap between 2.2 and 3.4 percentage points. Furthermore, the positive impact of hotel prices on growth is larger for high-growth establishments. Accommodation prices significantly decrease with the number of local competitors with a non-linear form and increase with size. City hotels and accommodation in the capital city have the highest revenues per guest night.     

Systematic effects of crime on hotel operating performance

We examine the systematic effects of crime on hotel operating performance based on data from a sample of 404 Houston hotels from January 2009 to December 2014. Econometric results show that Part I crime (i.e., violent and property crime) incidents have a significantly negative impact on hotel operating performance (measured by revenue per available room), ceteris paribus. Also, the marginal effect of crime declines as crime density level increases. Separate examinations of violent and property crimes show that they exert significant and negative impacts on hotel operating performance, with the impact of violent crimes being more substantial. In addition, the results reveal that both nighttime and daytime crime incidents significantly and negatively impact hotel operating performance. Finally, as evidenced by the insignificant impact of crime incidents occurring on hotel premises, the results suggest that hotels are generally effective at maintaining systematic security measures and preventing crime incidents from occurring.     

The impact of online user reviews on hotel room sales

Despite hospitality and tourism researchers’ recent attempts on examining different aspects of online word-of-mouth [WOM], its impact on hotel sales remains largely unknown in the existing literature. To fill this void, we conduct a study to empirically investigate the impact of online consumer-generated reviews on hotel room sales. Utilizing data collected from the largest travel website in China, we develop a fixed effect log-linear regression model to assess the influence of online reviews on the number of hotel room bookings. Our results indicate a significant relationship between online consumer reviews and business performance of hotels.     

Examining the determinants of hotel chain expansion through international franchising

This study proposes and tests an agency-based organizational model of internationalization through franchising in the hotel sector. Using data obtained from a Franchisor Questionnaire 2001-2008, we analyzed a panel of 117 observations of 17 U.S.-based hotels. Our analysis reveals that a hotel franchisor's decision to internationalize through franchising is positively related to the percentage of franchises, the ratio of franchised units to the total number of units. The article contributes to the literature by empirically modeling international franchising of hotels, which present unique characteristics among franchising companies, with a high investment capital requirement, maturity in the product life cycle, and a high level of standardization and globalization of operations. The unique characteristics of individual chains and their segment in the industry are particularly important, as revealed by both data analysis and expert opinion.     

How hotel owner-operator goal congruence and GM autonomy influence hotel performance

A principal-agent relationship exists between hotel owners and the management companies which often operate their hotels. In addition, they both act as principals to a mutual agent, the hotel's General Manager, who is tasked with trying to achieve each parties' objectives. Extensive research on hotel management agreements which govern the owner-operator relationship has demonstrated that these objectives are often incongruent. However, the property-level managerial and performance implications of their goal incongruence has not been empirically examined. This study analyzes these issues using a matched sample of surveys from both owners and operators across 64 hotels operated under hotel management agreements. Using structural equations modeling, we demonstrate that owner-operator goal congruence positively impacts hotel performance and that this relationship is both mediated and moderated by the hotel General Manager's autonomy.     

Diversification strategies and failure rates in the Texas lodging industry: Franchised versus company-operated hotels

This research examines the relationship between geographic, brand, and segment diversification and hotel failure rates based on ownership structure, i.e. franchised and company-operated hotels, in the Texas lodging industry. Literature on diversification strategies is mainly based on financial measures of performance and offers mixed results; only few studies have assessed firm failure rates directly based on distinct diversification strategies at the establishment level. The performance outcomes are significantly heterogeneous not only based on the strategies, but also on the ownership structures, which are yet to be examined. Using data from the Texas Comptroller of Public Accounts from 2000 to 2018, a semi-parametric Cox proportional hazard model is estimated, and the findings reveal that failure rates are not significantly tied to particular types of diversification and ownership structures. This research provides insights on hotel diversification strategies and their relative dominance on hotel failure rates based on franchised and company-operated hotels.     

Developing ambidexterity through quality management and their effects on performance

This study analyzes the influence of quality management practices on organizational ambidexterity and on performance, and the mediating role of ambidexterity in the relationship between quality management practices and performance in the hotel industry. The paper uses Partial Least Squares (PLS) analysis based on data from 365 Spanish hotels. The results show that quality management practices favor the development of organizational ambidexterity, that is, they help balance exploitation and exploration activities, and this contributes to improving hotel performance. Moreover, ambidexterity acts as a partial mediator between quality management practices and hotel performance. These findings imply that quality management practices can create an appropriate organizational context to simultaneously develop both service improvements (exploitative innovations) and service innovations (explorative innovations). This paper contributes to theory by developing new knowledge regarding quality management as a facilitator of ambidexterity, and the mediating role of ambidexterity in the relationship between quality management and hotel performance.     

The effects of Airbnb’s price positioning on hotel performance

This study examined the relationship between the price positioning of Airbnb listings, measured in price difference between a hotel property and the nearby Airbnb listings as well as price dispersion among these Airbnb listings, and the performance of nearby hotels. An exploratory analysis using field data points collected from the Airbnb listings and their hotel counterparts in the metropolitan area of Austin, Texas between Quarter 3, 2008 (debut of Airbnb in Austin) and Quarter 2, 2011 reveals intriguing findings. The entry of Airbnb listings was penetrative to local hotels. However, the price positioning of Airbnb, manifested in higher average price as compared to nearby hotels, as well as larger price dispersion among individual listings, significantly mitigated such penetration. Important theoretical contributions and practical implications for hotels are discussed.     

What explains differing holding periods across hotel investments? A hazard rate framework

We explain the variation in hotel holding periods (HP) based on liquidity needs, owner type, acquisition conditions and timing of hotel renovation. Contrary to popular belief, properties owned by listed companies tend to have longer HPs due to lower liquidity constraints. REITs sell heterogeneous hotels sooner to strengthen their focus whereas REOCs keep such assets longer for diversification benefits. Moreover, we document that higher quality hotels tend to have longer HPs, and that capital expenditure employed in renovating an acquired asset prolongs the HP whereas assets renovated before acquisition experience shorter HPs. Finally, we show how our model can be used in practice to predict the median HP based on a given hotel characteristics, and present a method to adjust the DCF discount rate according to the selected holding period.     

How do hotels choose their location? Evidence from hotels in Beijing

This study aims to investigate potential factors contributing to the hotel location choice by an ordered logit model incorporating both hotel and location characteristics. The results suggest that, star rating, years after opening, service diversification, ownership, agglomeration effect, public service infrastructure, road accessibility, subway accessibility, and accessibility to tourism sites are important determinants. By examining location models for different periods, different star rating levels, and different ownership, we show that, downscale hotels tend not to actively seek the benefits of agglomeration effects while upscale ones are more sensitive to accessibility. Finally, agglomeration effects are further investigated by looking into agglomeration heterogeneity, agglomeration scope, scale related and ownership related agglomeration, and agglomeration zoning.     

Exploring the impact of personalized management responses on tourists’ satisfaction: A topic matching perspective

As an online reputation management tool, hotel managers increasingly rely on management responses to online reviews to improve the electronic word of mouth (eWOM). Due to the substantial heterogeneity of textual reviews with different topics, it is particularly challenging to personalize the response for customer relationship management. Based on a panel data of 500 hotels in the state of Texas collected from TripAdvisor, this study examines the influence of personalized management responses on rating increase from a topic matching perspective. The empirical results show that (1) a high level of topic matching of management response leads to an increase of hotel online rating; (2) a high valence and a large variation of existing rating weaken the positive influence of such personalized management response; (3) the influence is stronger for economy hotels compared to luxury ones. Lastly, practical implications are provided.     

Does Triple Bottom Line reporting improve hotel performance?

Triple Bottom Line (TBL) reporting is a comprehensive approach to achieve sustainability as it integrates reporting on environmental, social and financial issues. While society is pushing hotels to increase their commitment to TBL reporting, opinions are divided as to whether TBL reporting affects hotel performance. The present study uses the Data Envelopment Analysis (DEA) method to address this important question. Our results, based on a sample of Slovenian hotels, support the hypotheses that more extensive reporting on environmental, social and financial issues lead to better hotel performance. We show that reporting on environmental issues has a slightly higher impact on performance than reporting on social and financial issues. We discuss the implications of the study and provide directions for future research.     

Location advantages of lodging properties: A comparison between hotels and Airbnb units in an urban environment

This study aims to investigate various types of location advantages that contribute to lodging property performance. Using monthly revenue data for individual urban hotels and Airbnb units in Houston, Texas from 2014 to 2016, we apply the Hausman-Taylor model to estimate the effects of location factors. Several factors are confirmed, including accessibility to points of interest, transport convenience, the surrounding environment, and market conditions. The overall effect of location advantage is more substantial for urban hotels than Airbnb units. Findings do not reveal a sizable competition effect between urban hotels and Airbnb units. Furthermore, we unveil factors associated with location advantages for different hotel classes and Airbnb types by estimating the model using different sub-samples.     

Carbon dioxide emissions generated by energy consumption of hotels and homestay facilities in Taiwan

In the field of the tourism, hotels and homestay facilities account for considerable amounts of energy consumption and CO₂ emissions. This study presents an investigation conducted on the CO₂ emissions from four types of hotel in Taiwan. According to the results, the average CO₂ emissions of international tourist hotels, standard tourist hotels, general hotels, and homestay facilities are 28.9, 19.2, 12.5, and 6.3 kg-CO₂/person-night, respectively. Hotels with higher service levels produce higher average CO₂ emissions per person-night. Analytical results indicate that increasing stays at hotels with low CO₂ emissions (such as homestay facilities and general hotels), accommodating more guests together per room, and enhancing energy usage efficiency, can effectively reduce hotel CO₂ emissions without reducing the total number of guests. The results of this study may be applied to CO₂ reduction programmes for tourists, hotel enterprises, and contribute toward the formulation of government policy in Taiwan.     

This hotel is family-run! Enabling positive consumer response via perceived hospitableness

Family-run businesses are key players in the hotel industry and provide accommodations in many tourism regions such as the Austrian Alps. To date, research has failed to see the family firm status as a source of competitive advantage for the hospitality industry, despite often being used in practice to attract customers. Through the theoretical lens of signaling theory, this study therefore conducted experiments using fictitious hotel websites with participants from a German online panel (Austria’s largest incoming market) to investigate the effectiveness of family firm brand signals. The results confirm positive effects of communicating the family firm image on consumer response such as word-of-mouth, willingness to pay a price premium, and booking intention. We highlight that this effect is explained by perceived hospitableness. As such, we demonstrate that hotels can capitalize on their unique status by communicating their family firm image.     

Financing behaviour of Portuguese SMEs in hotel industry

In this study, using panel data models, we analyze whether the capital structure decisions of SMEs in the hotel sector follow the predictions of Pecking Order and Trade-Off theories. The results suggest that these theories are not mutually exclusive in explaining the capital structure decisions of SME hotels. The results obtained indicate that these firms follow a hierarchical order in their selection of financing sources, corroborating the assumptions of theory. The results also show that SME hotels adjust the level of actual debt towards optimal debt ratio as well as size, asset tangibility, growth opportunities, non-debt tax shields, and risk influence debt. These results suggest that the financing behaviour of SME hotels is in agreement with the predictions of theory. Therefore, Pecking Order and Trade-Off theories contribute to explaining the financing behaviour of SMEs in the hotel sector.     

A quantile regression analysis of tourism market growth effect on the hotel industry

This study used the quantile regression method to investigate how inbound tourism market growth proxied by the growth rate of total foreign tourist arrivals (GTA) affects the growth rate of sales (GS) and financial performance of hotel firms in Taiwan. The ordinary least squares estimation results of panel regression test revealed that GTA significantly affects GS, but has no significant effect on financial performance (proxied by hotel equity return). However, quantile regression tests revealed new and interesting results. GTA has a significant effect on GS at the different quantiles of GS. In comparison, although hotel equity return was not significantly related to GTA at the median and high quantiles, the effect of GTA on hotel equity return was statistically significant at the low quantiles. These results suggest that the effect of GTA on hotel equity return is asymmetric and state-dependent, conditional on the distributions of hotel equity return. The study further identified that GTA has a significant influence only on equity returns of hotels with a small size.