The profitability impact of REIT requirements: A comparative analysis of hotel REITS and hotel C-Corporations

Under the influence of regulatory requirements, REITs have evolved into entities that have distinct financial and organizational characteristics from their C-Corporation counterparts. This study aims to investigate whether hotel REITs are more profitable than hotel C-Corps and how REIT regulations contribute to this difference. The results indicate that despite the differences in tax obligation, operating expense, and dividend policy, hotel REITs and hotel C-Corporations are not significantly different in profitability. However, the analysis suggests that hotel C-Corps have advantage over hotel REITs in improving profitability through dividend payout increases. The findings also suggest a possible non-linear relationship between profitability and dividend payout, presenting an opportunity to extend Jensen's (1986) agency cost theory.     

Lodging REITs and third-party operators: Do more operators enhance the performance of REITs?

Lodging REITs are required to hire unaffiliated third-party operators to manage their properties. It has been noted that some lodging REITs use only one operator, whereas others hire a number of different operations. However, why lodging REITs choose to hire one or more operators has not been verified yet. Accordingly, this study intended to examine whether hiring more operators (i.e., operator diversification) affects the performance of lodging REITs. The results of this study showed that diversifying third-party operators has a curvilinear relationship with firm performance. Furthermore, the curvilinear relationship can weaken when operator diversification is paired with geographic diversification, but the relationship does not change depending on segment or brand diversification. This study implies that it is critical to understand not only the appropriate number of operators but also how to combine diversification strategies to ensure the success of lodging REITs.     

Performance Analysis of Lodging REITs in Relation to Market Segments

This article examines the financial performance of lodging real estate investment trusts (REITs) in relation to their market focus. Secondary data were collected for from 2004 to 2008 from lodging REITs that were traded on major U.S. stock exchanges. Data envelopment analysis (DEA) was used to assess the efficiencies of market segments to generate financial performance. The results showed that two lodging REITs were consistently efficient during the study period relative to other lodging REITs. In particular, lodging REITs investing and/or operating in one or more relatively similar market segments and those focusing on the upper-upscale segment were more efficient than others. This study could provide managers, owners, and investors of lodging REITs preliminary evidence of the relationship between market segments and firm performance. This article also proposes a framework for future investigations to assess the performance of REITs.     

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.     

Asset-light strategy and real estate risk of lodging C−corps and REITs

The asset-light strategy has been gaining popularity among practitioners for its virtues in lowering capital investment burden and allowing efficient expansion. Meanwhile, arguably the greatest advantage of the strategy—a mitigating effect on the real estate risk exposure—has yet to be validated. To empirically test this effect, this study adopts a comparative approach, utilizing data on both lodging C-corporations and real estate investment trusts (REITs). Yearly firm-level real estate betas are estimated through an augmented Fama-French asset-pricing model for all lodging firms and REITs between the years 2002–2016, and further used for a second-stage analysis on their relationship with real estate ownership and liquidity. Findings reveal that 1) lodging firms are significantly less exposed to real estate risk than REITs, 2) lodging firms may still be conditionally exposed to real estate risk under liquidity constraints, and 3) certain unique characteristics of REITs render differences in the effects of liquidity.     

Compensation practices in the lodging industry: Does top management pay affect corporate performance?

The current study examines the relationship between executive compensation and firm performance in the U.S. lodging industry. It is not clear-cut whether performance leads to compensation or compensation drives firm performance. Our contention is that cash and lagged equity-based compensation drive the firm performance. Our findings suggest that chief executive officer's (CEO) contemporaneous cash-compensation and one-year lagged equity-compensation positively affect the accounting performance measures return on assets and Tobin's Q; but neither compensation components affects the market-performance measure, stock returns, in the lodging industry. Quantitatively similar findings are found for the chief financial officer (CFO). Further robustness test show that further lags of equity compensation of both named executives do not result in increased stock performance in the lodging industry.     

Risk return and cost of equity of small and large casual-dining restaurants

Although the financial performance of US casual-dining restaurants has been better than returns in other restaurant segments, it is not known how large and small casual-dining restaurant companies perform when their stock returns are adjusted for risk. The present study uses traditional and contemporary risk-adjusted performance and cost of equity models to fill the void in this area of research. The results indicate that large casual-dining restaurants outperformed their smaller counterparts on a risk-adjusted basis, and had a lower cost of equity for the 1998–2002 period. In addition, the findings demonstrate that the cost of equity estimates pose some serious challenges when sub-periods before and after September 11 events are included in the analysis.     

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.     

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.     

Toward a resolution of the cost of equity conundrum in the lodging industry: a conceptual framework

The firm value estimate is derived from accounting and finance practices that focus on physical assets as opposed to intangible assets (Arthur Andersen Hospitality Leisure Executive Rep. 5 (1998) 2). The cost of equity estimation models used in firm valuation and capital investment decisions fall short of tapping important constructs to firm value, especially the intangible ones. The purpose of this study is to assess the present cost of equity capital determination models and provide a view of their relevancy for the lodging industry while simultaneously attempting to propose new options to meet the valuation and capital budgeting needs of the lodging industry.     

Using commercial mortgage loans to assess risk and return in the lodging sector

The purpose of this study is to investigate the risk and return features of the lodging sector using a large sample of 16,898 commercial mortgage loans securitized into commercial mortgage-backed securities (CMBS) in the U.S. between 2010 and 2018. The results of the analysis show significantly lower loan-to-value (LTV), higher debt service coverage ratios (DSCR), and higher credit spreads in the lodging sector than all other commercial property sectors. Additional findings document significantly higher lodging sector capitalization rates and equity dividend rates. Taken together, the results of the study provide strong empirical support for the positive relationship between risk and return in the lodging sector. Therefore, investors will require higher returns to compensation them for the additional risk of investing in the lodging sector. The theoretical and practical implications of these results are also discussed.     

Assessments of Lodging Service Unit Performance for Repeat Business

Abstract

Generating repeat business has been one of the greatest challenges to lodging marketers. This study explores a new approach to predicting customers' repatronization intention from the performance of key service units in lodging organizations. Repeat and first-time customers are studied separately in order to draw effective strategic implications for lodging operators. The results of this study show that repeat and first-time customers have different reasons for their continuous patronization to a particular lodging company. Practical implications and future directions for this line of research are discussed.     

The relationship between board diversity and firm performance in the lodging industry: The moderating role of internationalization

Following the emphasis on board diversity and its roles on firm performance, an examination on the relationship between board diversity and firm performance in the lodging industry is conducted. Further, this study employs internationalization, a moderator, to more comprehensively investigate the board diversity-firm performance relationship. This study found that gender diversity shows a positive and significant effect on firm performance while age diversity has an insignificant effect on firm performance. Regarding the moderating effect of internationalization, the degree of internationalization significantly magnifies the effect of gender diversity on firm performance but insignificantly moderates the effect of age diversity on firm performance. This study attempts to contribute to the hospitality and tourism literature by examining the topic that has been rarely dealt with and provide practical guidelines for stakeholders of a lodging firm especially when selecting board members.     

高星级酒店业的信息技术“生产率悖论”研究——基于广州案例

信息技术与酒店业的结合给酒店业带来了新的发展机会.国外有大量的学者致力于信息技术投资与企业生产率及业绩之间关系的研究,但并没有一致的结论.文章通过对广州市高星级酒店的相关调查,获取了第一手数据,借助AMOS软件的验证性因子分析及SPSS软件的相关性分析和多元回归分析功能,以检验信息技术的应用对酒店业绩的影响.结果显示,信息技术“生产率悖论”在高星级酒店业内不存在,前厅应用、客人相关界面应用、餐厅及宴会管理系统及后台应用均对酒店业绩有积极的作用.其中,客人相关界面应用对酒店业绩影响最大,因此应着重投资.文章的结论将为高星级酒店业决定是否战略性地投资于信息技术或集中于某些特定领域提供重要的信息.最后,文章还对研究的局限性以及后续可以开展的研究进行了一定的展望.     

Marketing decisions,customer reviews,and business performance: The use of the Toprural website by Spanish rural lodging establishments

Modern travelers often rely on reviews provided by other consumers online, or electronic word of mouth (eWOM), to choose their accommodations. This study considers the effects of marketing decisions by rural lodging establishment owners (i.e., price and advertising expenditures) on eWOM (i.e., ratings and number of reviews), as well as the effects of eWOM on business performance. The results rely on marketing data and customer reviews obtained from a leading rural tourism infomediary website, related to 202 Spanish rural lodging establishments. A complementary survey also provided information about the lodging establishments' performance. The study thus reveals that price and advertising expenditures affect eWOM; in turn, eWOM affects business performance. Moreover, owners' experience with the infomediary slightly moderates the link between eWOM and performance.     

An examination of executive compensation in the restaurant industry

The purpose of this empirical study is to examine executive compensation in the restaurant industry. The effects of a set of accounting-based performance measures, market-based performance measures, and executive-related factors on the compensations of firm CEOs, other senior executive managers, and board members were examined. Drawn from 16 consecutive years of data and a sample of over 2200 observations from restaurant companies, the findings revealed that determinants of equity based compensation vary by different types of executives. In addition, this study supports the notion that executive compensation in the restaurant industry is determined not only by firm performance measures but also by executive-related characteristics such as tenure.     

The financial impact of online customer reviews in the restaurant industry: A moderating effect of brand equity

The salient impact of electronic Word-of-Mouth (eWOM) on firm performance has been widely noticed by scholars and practitioners. While eWOM serves as an important source of information that helps reduce perceived uncertainty risks in service purchases, it is highly likely that other sources of information are simultaneously used with eWOM in the purchase decisions. Thus, this study empirically examined the financial effects of restaurant eWOM (review volume and review rating) and their changes in the presence of brand equity. Three-stage least squares analysis was employed in the empirical investigation. Our findings revealed that review volume and review rating contributed to restaurant profitability. Brand equity was found to moderate the effects of the review attributes on restaurants profitability, which implies that eWOM has a greater influence on the financial performance of weak-branded restaurants than strong-branded ones. Implications for researchers and practitioners are discussed.     

Analyzing the influence of firm-wide integrated marketing communication on market performance in the hospitality industry

Over the last decade, scholars have recently emphasized the need for tourism marketers to orchestrate the wide range communication activities and forms via the adoption of Integrated Marketing Communication (IMC). However, prior research has almost neglected the role of IMC in hospitality management. This paper adopts a broad organizational approach conceiving IMC as a concept that involves the whole organizational entity and aims to analyze the effects of IMC on market performance, in terms of superior sales and financial results, greater brand advantage and customer-related outcomes for those businesses providing lodging services. To pursue this research purpose, a survey has been conducted among corporate-level senior managers of lodging businesses operating in Spain. The findings provided further and more compelling empirical proof of the positive influence of IMC on market performance, responding to the call for more rigorous empirical research to demonstrate the beneficial effects of firm-wide IMC on market performance.     

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.     

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.