Journal of Hospitality Financial Management: Volume 27, Issue 2
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Hotel Industry Performance in 2018-2019 and the JHFM Index
(2019-01-01) Sheel, Atul
Hotel Asset and Equity Risk Before, During, and After the Global Financial Crisis
(2019-01-01) Johnson, Marilyn F.; Johnson, Mark S.; Tessmer, Antoinette C.
In this paper, we use asset betas and equity betas over the period January 2000 through December 2015 to investigate the operating and financial risk of hotel industry REITs and C-Corps. We conclude that, on average over our sample period, the operating risk of C-Corps exceeds that of REITs. One interpretation of this result is that management contracts between REITs and C-Corps allocate more operating risk to C-Corps than to REITs. We also find that, on average, during our sample period, the equity betas of C-Corps exceed those of REITs. However, the difference between the average equity risk of the two sectors is much smaller than is the sectors’ difference in operating risk. Because equity betas capture both operating and financial risk, these results imply that REITs have significantly less operating risk than C-Corps and offset their lower business risk with higher financial leverage. During the global financial crisis, operating risk increases in both hotel industry subsectors, and the amount by which C-Corp asset betas exceed REIT asset betas is roughly proportionate to that observed in noncrisis periods. During the financial crisis, however, REITs experienced a greater increase in finan- cial leverage than did C-Corps, with the result being that the normal relation reverses, i.e., during the global financial crisis, REIT average equity betas significantly exceeded the average equity betas of C-Corps.
Intangible Assets Valuation in the Hospitality Industry
(2019-01-01) Du, Ruixue; Li, Yuan; Singal, Manisha
In publicly traded firms, there is usually a discrepancy between the market value and the book value of the firm, often due to the valuation of intangible assets. Understanding this discrepancy is import- ant for investors, especially in the service industries like hospitality, where there is considerable industry disruption and consolidation. In this study we examine the effect of four intangible asset investments—research and development (R&D), training, advertising, and pension—on the market premium of restaurant firms. Using a longitudinal sample of 1,421 firm-year observations, the results of our analyses show that R&D, training, advertising, and pension are all important valuation con- structs in the hospitality industry, and their effects on market premium vary by restaurant type. This study fills the gap in the current literature by providing a quantitative method to value intangible assets in the hospitality industry. The practical implications of this study will provide managers in the hospitality industry with helpful insights for strategic decision making, specifically regarding R&D, advertising, and employee compensation.
The Tendency of Hotel Rooms Division Managers to Create Budgetary Slack
(2019-01-01) Ramdeen, Collin; Taylor, Marcia; Lee, Scott
This study explores how the budgeting system impacts rooms department managers’ tendency to create budgetary slack. The results provide support for four hypotheses, specifically indicating that rooms department managers’ tendency to create budgetary slack does change with the setting and the way the budgeting system is implemented. The major practical implication of this study is that allowing rooms department managers to participate actively in the budgeting process seems to reduce their tendencies to create budgetary slack.
Liquidity Effects on Travel and Tourism Stocks following Global Financial Crises
(2019-01-01) Gregoriou, Andros; Liasidou, Sotiroula
This paper explores liquidity effects following the global financial crises between 2007 and 2009 for 26 stocks listed on the Dow Jones Travel and Tourism Index. We find evidence of a sustained increase in the liquidity of the stocks as a result of the financial crises. The empirical findings are consistent with the information cost/liquidity hypothesis, which states that investors demand a lower premium for holding stocks with relatively more available information. Our results suggest that the travel and tourism industry is no longer considered a luxury item. On the contrary, it appears to be more of a necessity to stimulate business and happiness for firms and individuals, respectively, in times of financial turmoil.