Journal Issue: Journal of Hospitality Financial Management: Volume 23, Issue 2
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2015-16-12
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2015 – A YEAR IN REVIEW FOR HOTEL FIRMS
(2015-12-16) Sheel, Atul
WHO ARE THE BULLS AND BEARS IN GLOBAL LODGING MARKETS?
(2015-12-16) Barreda, Albert A.; Kizidag, Murat
This article looks at the values of market-based equities (common stocks) based on the relative investment valuation, analyzed with several earnings multiples in global lodging markets in 2014. To be specific, we compare the value of various common stock portfolios sorted for four geographical regions with those relative value investment metrics so that we can make a solid judgment about bullish and bearish markets demonstrating investors’ confidence or stagnancy, anomalies in prices indicating under and overvalued stocks, and outperforming lodging portfolios in global markets. Common stock prices in portfolios are standardized, utilizing earnings parameters such as Current Price/Earnings Ratio (PE) and its variants (Trailing and Forward PE), Price/Earnings to Growth (PEG), and The Market Value of Debt and Equity free of Cash-to-EBITDA (Value/EBITDA). Linking the relative value with earnings proxies and the stock portfolios, which are extracted in a homogeneous industry but are sorted from heterogeneous regions, primary findings of this study reveal that western and eastern markets have outperformed the Latin markets in regard to future earnings estimate, earnings growth, and excessive returns from the invested capital.
DYNAMIC PRICING AND MINIMUM LENGTH OF STAY CONTROLS AS A HOTEL MANAGEMENT PRACTICE: ARE THERE CUSTOMER PERCEPTION, ETHICAL, AND LEGAL QUESTIONS?
(2015-12-16) Wilson, Robert H.; Enghagen, Linda K.; Lee, Minwoo
Length of stay controls and dynamic pricing are components of revenue management tools widely used in the lodging industry. Length of stay controls require guests to stay for a minimum number of nights, even if they might wish to stay for only one night. Dynamic pricing characterized by high room rates and length of stay controls are common when hotel demand is strong for a specific event, such as a college graduation, natural disasters and emergencies, New Year’s Eve festivities, July 4 fireworks and concerts, or a major sporting event. While implemented to boost revenue, the combination of dynamic pricing and length of stay controls can raise ethical, legal, and fairness questions that can lead to adverse impacts on hotels. Dynamic pricing may be legal or illegal, depending on state law and the circumstances. Length of stay controls may also be legal or prohibited depending on the state. The authors suggest some alternatives that will allow hoteliers to comply with existing statutes and case law and navigate ethical, legal, and fairness questions.
EXPENSE PREFERENCE BEHAVIOR BY MANAGERS IN CASINO RESORTS
(2015-12-16) Repetti, Toni; Dalbor, Michael C.; Singh, Ashok K.; Bernhard, Bo J.
The main goal of management in the United States is to maximize the wealth of shareholders. Managers, though, sometimes make decisions that benefit them more than the shareholders. When this occurs they are considered to be exhibiting expense preference behavior. This study evaluates expense preference behavior by managers of Nevada casinos. Using ordinary least squares regression, significant positive results show that for each 1% increase in revenue, employees increase 0.88%, salaries and wages increase 0.98%, and total payroll increases 1.01%. Also during the biggest economic downturn to hit Nevada casinos, management significantly decreased employees 14.7%, salaries and wages 4.9%, and total payroll 3.9%. Since managers are able to decrease payroll-related expenses after controlling for the change in business volumes, they are most likely operating inefficiently during good economic times. These additional expenses equate to a lower net income, which decreases owners’ residual income and increases the need to borrow during growth periods.
BUSINESS CYCLE AND LONG-TERM DEBT: EFFECTS ON HOTEL OPERATING LEASE
(2015-12-16) Lee, Myong Jae; Huh, Chang; Lee, Ju Yeong
Over the last 25 years, many hotel operators have chosen to lease their property instead of owning as a financing strategy. This paper examines the combined and separate contributions of business cycles and a firm’s level of long-term debt on hotel owner/operator use of operating leases. The results indicate that operating leases were used more often during contracting business cycles and less often during cycles of expansion. According to the results, operating leases and long-term debt are not complementary, although they are increasingly treated as complements when the economy suffers a downturn.