The moderating role of brand diversification on the relationship between geographic diversification and firm performance in the US lodging industry

In spite of the prevalence and strategic importance of diversification for US lodging firms, research on the effects of diversification has been insufficient in the hospitality literature. Especially, an examination of the moderating effect of brand diversification on the relationship between geographic diversification and performance of US lodging firms has been lacking in the literature in various disciplines, including hospitality field thus far. This study aims to first investigate the individual effect from each of brand and geographic diversification strategy on firm performance in the US lodging industry. Further, to investigate effects of diversification comprehensively, this study examines the moderating effect of brand diversification on the relationship between geographic diversification and performance of US lodging firms. The study's results indicate a positive and significant effect of geographic diversification on firm performance, an insignificant effect of brand diversification, and a positive and significant moderating effect of brand diversification in the US lodging industry.     

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.     

Determinants of radical innovation in clustered firms of the hospitality and tourism industry

Social capital is a key resource encouraging innovation in clustered firms of the hospitality and tourism industry, however it may be influenced by managers perception of market dynamism. This paper analyses the moderator role of ma’rket dynamism perception among the three dimensions of social capital −structural, relational and cognitive- and radical innovation. We conducted an empirical study on a sample of 215 hospitality and tourism firms located in World Heritage Cities of Spain, by considering each city as a cultural tourism cluster. The structural equations analysis shows divergent direct and moderated effects for the dimensions of social capital. Specifically, the negative effect of structural social capital on radical innovation worsens when market dynamism perception is higher. However, market dynamism perception improves the effects of relational and cognitive social capital on radical innovation. The study contributes to the understanding of the antecedents of radical innovation at firm level in the context of cultural tourism clusters.     

Competitive advantages of franchising firms and the moderating role of organizational characteristics: Evidence from the restaurant industry

This study investigates the effects of a firm’s involvement in franchising on efficiency and differentiation as defined in Porter’s generic competitive strategy framework. The study further examines the moderating effects of organizational characteristics (prior experience in franchising and business type) on the relationship between franchising and efficiency and between franchising and differentiation. Results indicate that as a firm increases its involvement in franchising, differentiation increases, but efficiency does not. Furthermore, prior experience enhances the effects of franchising on efficiency and differentiation, while business type only enhances effects on differentiation. The findings suggest that as an interconnected governance structure, franchising offers benefits to franchisors by helping them develop competitive advantages and outperform their competitors in the market. By discovering the detailed channels through which hospitality firms could achieve business success, this study contributes to existing literature on franchising and hospitality management and provides guidance for industry practitioners.     

A theoretical link between corporate giving and hospitality firm performance

This study makes a unique contribution to the hospitality literature by offering a theoretical model of the link between corporate giving (CG) and hospitality firm performance based on a duopolistic competition model with rational profit-maximizing hospitality firms. The equilibrium outcomes of the proposed model explicitly explain the mixed findings of the relationship between CG and hospitality firm performance found in the previous empirical studies. Specifically, the optimal level of a hospitality firm’s CG is positively related to the total market demand and the competitive advantage of CG, and negatively related to the induced cost of giving practices. Moreover, a positive or neutral relationship between CG and hospitality firm performance depends on whether CG could induce a competitive advantage of brand differentiation and customer loyalty to increase profit.     

Antecedents of coopetition in small and medium-sized hospitality firms

Coopetition, which is entering cooperation with competitors, lets firms overcome the challenges of uncertain environments and their intense competition and pressure to innovate. The hospitality industry frequently experiences this kind of competition. It is also dominated by family-run small and medium-sized enterprises (SMEs), which are inclined towards cooperation due to their limited size and resources, along with their strong social ties. Investigating hospitality SMEs’ decision-making, this mixed-method study tests the antecedents of coopetition in 171 hospitality SMEs in western Austria. Its findings show that economic benefits and destination networks directly and positively influence coopetition, while family involvement indirectly and positively moderates the effect of environmental conditions and social relationships on coopetition. Information from follow-up interviews with 15 firm managers complements the understanding of these effects. Our findings encourage destinations to establish services helping family firms to coopete.     

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     

Impacts of geographic diversification on restaurant firms’ risk: Domestic vs. international diversification

In the hospitality context, the diversification literature has evolved to mostly focus on the impact of diversification on firm performance. However, without accounting for risk, the effect of diversification on firm value likely provides an incomplete picture. Therefore, this study investigates the influence of domestic and international geographic diversification on restaurant firms’ risk. This study uses the Berry-Herfindahl Index to measure the degree of domestic and international geographic diversification. Findings show a non-linear relationship between geographic diversification and restaurant firms’ risk. However, different shapes of the non-linear relationship are revealed between domestic and international geographic diversification and between operational and market-based risk. The results of this study indicate that the risk-reduction effects argued from the modern portfolio theory may be partially applicable to the geographic diversification for restaurant firms, suggesting a different view toward financial diversification and corporate diversification.     

The effect of environment risk,corporate strategy,and capital structure on firm performance: An empirical investigation of restaurant firms

The co-alignment process has been used in hospitality strategy as a framework to explain strategic orientation of firms. In this study, using a sample from the US restaurant industry, the authors test the simultaneous impact of surrogates from constructs identified as part of the co-alignment model, i.e. environment, strategy, and structure, on firm performance. Results indicate that a significant variance in firm performance is explained by the variables from the foregoing constructs of the co-alignment model. The robustness of this study provides restaurant firms’ managers a basis to evaluate their firms’ strategic orientation vis-à-vis its impact on firm performance.     

An examination of the progressive effects of hotel frontline employees’ brand perceptions on desirable service outcomes

The present study scrutinizes how hospitality firms’ internal branding influences the service performance of frontline employees in a progressive way. More specifically, based on social influence and social exchange theories, this study examines if organizational commitment mediates the link between hospitality frontline employees’ perceptions of brand authenticity (BA) and brand-value fit (BVF) and their service-related behaviors such as generating ideas for service improvement (GISI) and service-oriented citizenship behavior. With a matched sample of 286 customer-contact frontline employees and 33 of their supervisors from five-star hotels in South Korea, this study found that the higher employees’ perceptions of BA and BVF, the more likely they were to generate ideas for service improvement and engage in service-oriented citizenship behavior, as they were more likely to be committed to the firm. Based on the findings, implications are discussed for hospitality practitioners and researchers alike in terms of internal branding with frontline employees.     

Advertising and Firm Risk: A Study of the Restaurant Industry

Incorporating recent calls for understanding firm equity risk in relation to a firm's marketing efforts, this study examined the impacts of firm-level advertising spending on firm equity risk with publicly listed firms in the restaurant industry—a key hospitality industry. This study hypothesized and tested the effects of firm-level advertising expenditures on different types of firm equity risk (i.e., total, systematic, and unsystematic risk). Unlike previous empirical findings, we found that an increase in advertising expenditures significantly increased total and unsystematic risk of sampled restaurant firms. The findings provide new insights into the effects of advertising on firm equity risk in the literature, and important theoretical and managerial implications for restaurant firms.     

Deal characteristics and M&A performance: How do hospitality firms fare?

The global hospitality industry has experienced significant consolidation in the past several decades. While evidence in the general business literature suggests that the target firm shareholders gain instead of the acquiring firm shareholders, some studies in the hospitality industry have suggested that mergers and acquisitions (M&As) are also beneficial to acquiring firms. Using a comparative study design and a comprehensive sample over 41 years, we empirically examine whether M&As create more value in the hospitality industry than in other industries and whether certain deal characteristics may explain the potential performance differential. Overall, we find that M&As in the hospitality industry outperform M&As in non-hospitality sectors. When examining deal attributes, we find that relative size of target, cash method of payment, and an unlisted target are characteristics positively related to merger performance and help explain some of the performance differential. We contribute theoretically and empirically to the literature by demonstrating that industry and deal effects play an important role in M&A performance.     

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.     

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.     

The impact of food safety events on the value of food-related firms: An event study approach

Food safety events threaten not only consumers’ health, but also the value of associated firms. While previous studies examined the impact of food safety events on consumer demand for products, little attention has been paid to the impact on the market value of firms. Using the event study method (ESM), this study investigated abnormal returns (ARs) and cumulative abnormal returns (CARs) of firms associated with 40 food safety events over the past 25 years in the U.S. The results of this study demonstrated the magnitude and duration of the impact of food safety events on firm value. Moreover, firm-specific factors (past history and firm size) and situational factor (media attention) were found to influence the magnitude of the impact. This study contributes to the hospitality literature by extending the knowledge of the impact of food safety events and its practical implications for effective crisis management strategies for food-related firms.     

Can corporate social responsibility protect firm value during the COVID-19 pandemic?

The novel coronavirus (COVID-19) pandemic has caused a significant decline in the stock market worldwide, and hospitality companies are experiencing serious financial problems. Protecting and preserving firm value is a critical way of helping hospitality companies survive the crisis. The influence of corporate social responsibility (CSR) on firm value has been widely investigated. However, little is known about the stock price movement following CSR activity adoption during an industrial crisis. Using event study and difference-in-difference method, this study reveals that engaging in CSR activities can increase the stock returns and stakeholder attention of hospitality firms during the pandemic. Community-related CSR has a stronger and more immediate effect on stock returns than customer- and employee-related CSR. Results also indicate that hospitality firms that pursue improved stock market performance during a pandemic can invest in CSR to protect communities, customers, and employees for attracting further stakeholder attention.     

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.     

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.     

The impacts of complementary information technology resources on the service-profit chain and competitive performance of South African hospitality firms

The potential of information technology (IT) resources to empower employees, to shape customer service and contribute to the competitive performance of hospitality firms has received much attention. Yet empirical evidence has been lacking. This study draws on the resource-based view of the firm and the service-profit chain framework to develop and test a model of the effects of a complementary system of tangible and intangible IT resources on employee and customer service outcomes and on competitive performance. A structured questionnaire was used to collect data from 112 hospitality establishments operating in South Africa. Results revealed that the complementary system of IT resources has significant direct effects on competitive performance whilst its effect on customer service outcomes is fully mediated by employee outcomes. Results support the contention that hospitality service is information intensive. In addition to employees, tangible and intangible IT resources demand the attention of hospitality managers and their role in competitive strategy must be considered.     

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.