Assessing the Impact of the COVID-19 Crisis on Hotel Industry Bankruptcy Risk through Novel Forecasting Models

Abstract

In this paper, we assess the impact of the COVID-19 crisis on the bankruptcy risk of a sample of 100 hotel companies and, consequently, on the hotel industry in the Republic of Serbia. The assessment applies to the period, 2019–2026, with the use of the data on the financial indicators for 2015–2020. Five novel structural time-series models, which have the indicators derived from Altman’s EM Z”-score model as predictors, were used, and a new conceptual framework for assessing bankruptcy risk is provided. The framework expands the applicability of credit-risk-scoring models to multiyear predictions, and it takes into account the dynamism of the transitions of the firms among Altman’s risk zones. The predictions that were obtained when the Springate and Zmijewski scores were applied along with the Altman Z”-scores demonstrate the fair applicability of the scores for the models that are introduced here. The results of the models were confirmed by 270 artificial neural networks and they were compared to the results of the classical time-series models. The crisis started to have a negative effect on bankruptcy risk in 2020, and this effect is expected to rise until 2023; currently, in 2022, the highest number of hotel companies may be headed for bankruptcy. Amelioration in the position of the companies cannot be expected before 2024; however, even in 2026, the risk of bankruptcy will remain high when compared to the pre-COVID-19 period and, thus, the surviving companies will become more fragile to any further exogenous changes. These results provide a basis for the adaption of state-supported measures and business policies in order to withstand the crisis and to ensure sustainability.

COVID-19 and profitability of hotel companies in the Republic of Serbia

“…Temelkov (2022), conducting research on the example of 34 international hotel chains and resorts, on the basis of financial reports for 2019 and 2020, determined that the onset of the COVID-19 pandemic in most hotels influenced the decline in income and the increase in the ratio of costs and income. Matejić et al (2022) confirmed with their research that the COVID-19 pandemic had negative consequences on the operations of companies from hotel industry in the Republic of Serbia. Conducting research on the example of 100 randomly selected hotel companies in the Republic of Serbia, using neural networks, it has been determined that an improvement in their financial position can be expected not before 2024, and even in 2026.…”

Bankruptcy Prediction Model Development and its Implications on Financial Performance in Slovakia

“…The results showed that current liquidity, gross margin ratio, operating profitability of sales, and asset turnover are the most important explanatory factors in bankruptcy prediction. As declared by Matejic et al (2022), compared to the pre-COVID-19 period, the chance of bankruptcy will continue to be high, making the remaining businesses more susceptible to future exogenous developments. The specific interest in the manufacturing sector is presented in the research by Pacheco et al (2022), who also affirmed that estimates using financial information closest to the bankruptcy period could enhance the predictive power of the model.…”

The analysis of the revenues and expenses during COVID-19 pandemic: The case of companies of the Sector I: Accommodation and food services of the Belgrade stock exchange

“…Prvo, finansijska kriza 2008. godine, i drugo, finansijska i zdravstvena kriza kao rezultat virusa COVID-19 i pandemije koju je proglasila Svetska zdravstvena organizacija (Đekić et al, 2022, 36). Sektor turizma i ugostiteljstva je najviše pogođen nastankom pandemije (Mandarić et al, 2022;Matejić et al, 2022;Zhang et al, 2022). Usled propisanih mera za sprečavanje i/ili širenje virusa, poslovanje mnogih preduzeća iz ovog sektora je dovedeno u pitanje (Kalenjuk-Pivarski et al, 2021).…”