Exploring the Determinants of Hotel Operating Performance Stabilization in Emerging Markets: Deciphering the Myth

Abstract

Guided by resource-based view, this study investigates performance stabilization of new hotels in emerging markets. Profitability measures (e.g., gross operating profit percentage [GOP%]) and standard operating metrics (i.e., average daily rate [ADR], occupancy, and revenue per available room [RevPAR]) for 105 hotels in China, Indonesia, and Thailand were collected from 2002 to 2015. Growth analysis of the data showed that, contrary to industry assumptions within mature markets, most hotels did not stabilize when standard operating metrics were used; even when they did, they took significantly longer than 3 years. Instead, GOP% was identified as the best measure to exhibit stable performance; hence, this measure was econometrically regressed against each hotel’s comparative advantages. Results showed that real estate type and hotel positioning significantly affected performance stabilization, whereas location and scale did not. This study contributes to the current dearth of literature on strategic management and hotel performance, providing previously unavailable empirical evidence relating to bottom-line profitability.