The Impact of Exchange Rates on Hotel Occupancy

Abstract

In many hospitality and tourism programs, students are usually required to take only the most basic finance course. This can leave them drastically underprepared for real-world situations. Hospitality and tourism is the world's single largest industry and probably one of the industries most affected by foreign exchange movements. This exposure to foreign exchange movements is magnified by the discretionary nature of hospitality and tourism spending, making the profitability of hospitality providers very sensitive to changes in the exchange rate. This paper explores the effect, if any, of a change in the dollar value of five currencies-UK pound, euro, Canadian dollar, Japanese yen, and Mexican pesoon the hotel occupancy in seven major U.S. tourist destinations-Orlando, Los

A Revisit to the Impact of Exchange Rates on Tourism Demand: The Case Of Italy

“…Further, exchange rate was found to be the sole factor affecting German tourist demand (Patsouratis, et al, 2005) corroborating the findings of Dritsakis (2004). When examining demand via the proxy of U.S. hotel occupancy percentage regressed on a weighted index of five currencies (British Pound, Canadian Dollar, Euro, Japanese Yen, and Mexican Peso) found statistical significance of a strong or weak U.S. dollar impacting hotel demand in Orlando, Las Vegas, Los Angeles, and Miami (Bailey, et al, 2009). These findings support Crouch's (1995) meta-analysis of 80 studies indicating travel to North America is exchange rate elastic and confirms the findings of PriceWaterhouseCoopers (2000) about exchange rate elasticity of U.S. hotel demand.…”

“…The more depreciated an origin country's currency is against a desirable destination, the more expensive the purchases during a visit to that nation will be for the tourist. Exchange rates have therefore been repeatedly used as a proxy (Bailey, et al, 2009;Crouch, 1995Crouch, , 1996Lim, 1997;Onder, et al, 2009;Dwyer, et al, 2002;Webber, 2001). …”

“…Hotel occupancy has been used as a proxy for demand as it does not count day-trippers or travelers staying with friends and family (Witt & Witt, 1995;Bailey, Flanegin, Racic, & Rudd, 2009); however, it also does not separate domestic from international guests. Explanatory variables are more numerous and complex.…”