Public Financing of Headquarter Hotels in the United States

Abstract

The past decade has seen a dramatic shift toward public sector financing of large hotels in the United States. This dialectic analysis examines trends in public participation in hotel development and examines why governments are investing in these projects. It looks at the different types of public participation and considers the market implications of these subsidies on private sector hotel development. The case is made that there is a need for accountability and more thorough review of these public investments. The paper proposes various ways that this can be achieved and discusses barriers to such reforms.     

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.     

Product diversification and property performance in the urban lodging market: The relationship and its moderators

In this study, we investigate the relationship between product diversification and hotel property performance as well as the moderators of this relationship in the urban lodging market. Using stochastic frontier analysis with panel data, we calibrate the efficiency scores of 377 urban hotels in Beijing from 1994 to 2005. We then investigate the impact of product diversification on performance as measured by efficiency score. Results from panel data models indicate that the degree of product diversification exhibits a positive relationship with hotel performance. Hotel location, diversification expansion rate, and foreign ownership/operation are found to be significant moderating factors determining the effect of product diversification. Specifically, hotels that (a) are located farther from the city center, (b) expand diversification more slowly, and (c) are domestically owned are more likely to leverage the benefits stemming from product diversification. We provide a series of practical evaluation modules to help hoteliers improve performance.     

Survival in the lodging sector: An analysis at the firm and location levels

this paper studies the determinants of survival of 6494 Spanish hotel firms located in 97 national tourist destinations in the period 2005–2011. The characteristics of the firms and the tourist destinations where they are located have been studied through survival analysis techniques. This is relevant because the impact of the financial and economic crisis on the Spanish lodging sector has shown different effects among tourist destinations. The results confirm that the location significantly affects the probability of survival. In particular, the main determinant of firm survival is the level of occupancy in a tourist destination which has a positive effect. Also, we have found that a low level of competition reduces the average expected survival while the average profitability of a tourist destination has a positive effect on firm survival. Finally, the total effect related to destinations factors can reduce the expected survival by up to 90% (hazard ratio).     

Work stress and well-being in the hotel industry

Employee stress is a significant issue in the hospitality industry, and it is costly for employers and employees alike. Although addressing and reducing stress is both a noble goal and is capable of resulting in expense reductions for employers, the nature and quantity of hospitality employee stress is not fully understood. The first aim of this study was to identify common work stressors in a sample of 164 managerial and hourly workers employed at 65 different hotels who were each interviewed for eight consecutive days. The two most common stressors were interpersonal tensions at work and overloads (e.g., technology not functioning). The second aim was to determine whether there were differences in the types and frequency of work stressors by job type (i.e., managers versus non-managers), gender, and marital status. Hotel managers reported significantly more stressors than hourly employees. There were no significant differences by gender or marital status. The third aim was to investigate whether the various stressors were linked to hotel employee health and work outcomes. More employee and coworker stressors were linked to more negative physical health symptoms. Also, interpersonal tensions at work were linked to lower job satisfaction and greater turnover intentions.     

Extent of hedging in the US lodging industry

This study investigates the extent of hedging in a sample of lodging firms over a five-year period from 2000–2004. The findings document that lodging firms predominantly use interest rate swaps and options to manage interest rate risk exposure. Lodging firms primarily use these instruments as cash flow hedges of their long-term debt liability. The findings indicate that the hedging decision should be modeled separately using a two-step model. The results are robust to alternative specifications and provide evidence to show financial leverage, floating rate debt, information asymmetry, firm size, cash flow volatility and diversification, to be significantly related to the amount of hedging.     

Do hotel REIT companies face investment constraints? A comparison with C-corporation hotel companies

This study investigates whether corporate investment by REIT hotel companies (hotel REITs hereafter) is more constrained than investment by C-corporation hotel companies (hotel C-corps hereafter). The investments of hotel REITs and hotel C-corps are examined by comparing the sensitivities of investment to cash flow and investment opportunities between the two groups. Results show that the sensitivity of investment to cash flow is positive and significantly higher for hotel REITs than for hotel C-corps, suggesting that hotel REITs are likely to experience more constraints on their corporate investment. This finding suggests that hotel firms and owners should be more cautious about electing to be a REIT if they are planning large investments in the future. In addition, this finding has policy implications; even a small reduction in the rate of mandatory dividend payouts could significantly increase hotel REITs’ corporate investments.     

Re-examining the overcapacity of the US lodging industry

Although the deteriorating profitability of the US lodging industry has been repeatedly attributed to overcapacity, there has been little research on the causes of overcapacity. The authors suspect that this issue stems from the lack of a working definition of optimal capacity level. This study evaluates the optimum capacity of the US lodging industry based on the fundamental price theory, which posits that prices are determined through equilibrium. Results of the simultaneous equations model show that the industry has an incentive to maintain overcapacity because the outcomes of under-capacity are even less desirable. The uncertainty of demand further encourages overcapacity to some extent. Historical overcapacity cycles in the US lodging industry suggest that overcapacity seems to be an outcome of unexpected demand shocks, rather than the consequence of irrational overbuilding. Implications for the industry and suggestions for future research are presented along with the study findings.     

A quarantined lodging stay: The buffering effect of service quality

How do guests feel during their stay at quarantine lodging? This study draws on terror management theory and social exclusion theory to synthesize a model that highlights guests’ perceptions about their experience under enforced isolation. The model articulates guests’ feeling of anxiety and loneliness, whereas quality of service presents warmth and care that activates an anxiety buffer mechanism that mitigates the effect of anxiety. In turn guests’ level of anxiety is further explained by an interaction between their health status and the length of stay. Results point to a conduit for studying the dark side of hospitality, opening up research avenues that could help assess broader social behavioral changes during the global pandemic, while offering operators revelations for lodging management during a crisis.     

Determinants of using operating lease in the hotel industry

This study investigated the determinants of using operating lease in the hotel industry. The hotel industry has utilized operating lease not only for operating equipment but also as a financing instrument through ‘sales and lease back.’ This study found that hotel firms with less internal funds and/or with higher debt ratios are more likely to use operating lease. Contrary to the studies of other industries, hotel firms with less financially distressed are more likely to use operating lease. This study indicated that operating lease decrease as firm size increases, but only up to a certain level, after that level operating lease increase as firm size increases. Contrary to our expectations, the growth opportunity of hotel firms appeared to have no relationship to use of operating lease. These findings contribute to further understandings of hotel industry-specific information regarding what drives hotel firms to use operating lease.     

Revisit to the determinants of capital structure: A comparison between lodging firms and software firms

This study validates the contradiction between capital structure theories and previous empirical studies, and it further identifies lodging firms’ unique leverage behavior through a comparison to software firms, using a generalized least squares analysis. This study also explores the joint effects of key financial leverage determinants. The findings indicate that fixed assets, growth opportunities, and the joint effect of these two variables are the significant long-term debt determinants of the lodging industry. The analysis of the joint effect also suggests that fixed assets and growth opportunities affect each other's relationship with long-term debt usage. With the findings on lodging firms’ unique financing rationale, authors hope to provide useful information for corporate financial planners and lending institutions regarding debt-financing behavior.     

Strategy, organization structure and success in the lodging industry

Has Hyatt's success been the result of the way it has structured its organization? Research evidence has accumulated indicating that the way an organization is structured can have profound effects on its performance.Should every lodging organization adopt the same type of structure? Probably not! However, determining the appropriate organizational structure for a lodging organization requires considerable thought and analysis.The results of some of the more compelling research findings relative to the factors that affect the structuring of an organization and the relationship between organizational strategy, structure and effectiveness are examined. Some of these concepts are then applied in an analysis of the structure of three different lodging organizations.     

Web-based permission marketing: Segmentation for the lodging industry

Permission marketing is becoming an important tool in maintaining relationships with travelers via the Internet. Its growing importance can be seen in tourism marketing, specifically in the lodging industry. With an increase in industry use, the effectiveness of this technique needs assessment. This paper initiates this process by examining current methods used to collect contact information for the purpose of permission marketing. Three segments of the market are identified and compared based upon their willingness to supply contact information. Significant differences were found in socio-demographics, online habits, trip characteristics, and website design preferences. Implications for lodging marketers are presented and future research topics are discussed.     

Break-even analysis — a useful management tool in the lodging industry

The break-even point is an important tool of financial management. In this article I will describe a concept and basis for analysis that is quite different from the usual technique. In order to determine the portion of each expense that is fixed and the portion that is variable, which is the basis for calculating the break-even point, we will use linear regression analysis, a technique based upon the relationship between two variables. Detailed monthly operating statements are required for a complete departmental analysis using this technique; however, for the purpose of this article I have taken a shortcut and used only monthly sales and operating expenses. The amounts are taken from the monthly operating statements of a 352-room suburban hotel.     

Financing behaviors of hotel companies

To understand financing behaviors in the hotel industry, this study used canonical correlation analyses by examining the interrelationships between cross-balance-sheet accounts of hotel companies. The study confirmed that hotel companies followed the four common practices about the cross-balance-sheet interdependencies identified in the other industries. This study also discovered a few unique financing features of the hotel industry: (1) maturity mismatching between property, plant, and equipment (PPE) and short-term liabilities; (2) adjusting the funding sources of inventories according to the internal and external environments; and (3) high dependency of operating assets on stockholder's equity. This study also explains different financing features across three periods during 1990–2004. The findings are expected to contribute to developing knowledge about the financing behaviors of hotel companies as related to their asset structures.     

Innovation activity in the hotel industry: Evidence from Balearic Islands

The paper provides empirical evidence on technological activity in the Spanish service sector, in particular for the tourist accommodation in the Balearics. The study wants to fulfil the lack of analyses in the field of tourism. Commonly, the study of innovation activity has been carried out from a manufacture perspective, for that reason the paper discusses the precise definition of innovation in accommodation services. The data refer to a large representative sample of hotels in Balearic Islands (Spain), providing a homogeneous set of information. The results show as higher-categories hotels are more innovative than lower-categories hotels; an aggregated measure of technological innovation presents a rate over the average for hotels that belong to a chain, and that for hotels under management contract. Half of innovative companies adjust the human capital skills and abilities. The hotel industry is a supplier-driven sector that innovates introducing R&D embodied technology rather than undertaking internal R&D activities.     

Online upselling: Moving beyond offline upselling in the hotel industry

The purpose of this study is to understand how online upselling is used in the hotel industry as a part of revenue management strategy. This study used a convergent parallel mixed method design where qualitative and quantitative data were collected in parallel, analyzed separately, and then merged. Study 1 took a qualitative approach, exploring how online upselling programs can provide additional value over offline upselling and traditional revenue management practices. Study 2 adopted a quantitative approach to analyze customers’ bidding patterns for superior room categories through secondary data. Findings indicate that an omni-channel approach to upselling can tackle the fragmented nature of multichannel upselling communications to provide customers with consistent information and experience across these channels. Through an omni-channel approach, the hotel industry can develop personalized and streamlined upselling strategies.     

Barriers to EMS in the hotel industry

While some hotels have adopted the formal environmental management system (EMS) or the internationally recognised ISO 14001 Environmental Management Standard for the sake of the environment—or other claimed benefits—many hotels are still standing at the crossroads in adopting EMS. This exploratory study was conducted with the aim of investigating the barriers to EMS in the hotel industry in Hong Kong SAR. Of the 330 questionnaires mailed, 83 were returned. Using exploratory factor analysis to identify interpretable orthogonal factors, six factors that hinder hotels from adopting formal EMS were identified and interpreted. They are: (1) lack of knowledge and skills; (2) lack of professional advice; (3) uncertainty of outcome; (4) certifiers/verifiers; (5) lack of resources; and (6) implementation and maintenance costs. Independent samples t-test and ANOVA analysis were also conducted to gain a better understanding of the significant differences in the identified six factors on the barriers to adopting and implementing EMS in the hotel industry among different hotel demographic variables. Implications of the findings are discussed, while recommendations are made to reduce the barriers inhibiting the adoption of EMS in the hotel industry.     

The effects of customer voice on hotel performance

This paper investigates the effects of two critical customer voice variables on hotel performance. Specifically, the research provides a customer equity model in which the influences of both customer satisfaction and complaints are considered. The impact of the customer voice variables on hotel performance is investigated while considering the potential for moderating effects by hotel size and star rating. We use a more robust approach to measure firm performance than is traditionally used in satisfaction-performance studies. Finally the paper reports on the results of these investigations and outlines implications for both theory and practice.