The Relative Effect of Growth of Economy, Industry Expansion, and Firm-Specific Factors on Corporate Hotel Performance in Sri Lanka

Abstract

This study evaluates the relative effects of economic growth, industrial expansion, and firm-specific and contextual factors on corporate hotel performance in Sri Lanka. We use data from a sample of 29 listed hotels for 7 years from 2012 to 2018 and employ panel regression to uncover the relationship that exists between these variables. The findings suggest that the macroeconomic factors alone can account for a small part of the variance in return on assets and return on equity, and yet that these macroeconomic factors are the key drivers of the overall financial performance. Moreover, the selected macroeconomic factors, together with firm-specific and contextual factors, appear to have a profound impact on hotel performance. More specifically, growth in the number of tourist arrivals and growth in inflation are found to have a positive and significant impact on corporate hotel performance, while the interest rate has a significantly negative effect. Our findings with regard to the impact of growth in gross domestic product (GDP) on hotel performance are inconclusive. Furthermore, our findings reveal that the profitability of Sri Lankan hotels is driven by managerial efficiency, location factors, geographical diversification, and connection to a wider business network.

Conformity or differentiation? The effect of competitive strategy on hotel performance

“…In addition, the hospitality industry is vulnerable to economic conditions. Consumer spending on hotel accommodation is directly related to GDP performance (Oaten et al, 2015; Weerathunga et al, 2020). Therefore, we control annual gross regional domestic product per capita as regional characteristics (Kim et al, 2020).…”

Cognitive Dissonance and Public Compliance, and Their Impact on Business Performance in Hotel Industry

“…In terms of financial components of evaluating company's business performance, Weerathunga et al [62] has claimed ROA, ROE, CFPFS (comprehensive financial performance score) are the mainly-used measurement to evaluate the financial-performance of the corporate hotels and used these indicators to evaluate the hotel companies' business performance in Sri Lanka. As an outcome indicator of a company's financial condition over a certain period, the financial performance consists of measures of capital adequacy ratio, liquidity, leverage, solvency, and profitability, as well as the collection and use of funds [63].…”

Immediate impacts of COVID-19 lockdown on personal mobility and consumer behaviour of households in Sri Lanka

“…In addition, some districts such as Gampaha, Colombo, Puttalam, Kalutara, Jaffna, and Kandy were regarded as “high risk” areas that caused most economic activities to come to an indefinite standstill curfew in these areas. Since these areas were economically quite active districts, most of the sectors in the Sri Lankan economy, including apparel, travel, tourism, banking, and finance, were severely impacted by the spread of COVID-19 ( Weerathunga et al, 2020 ).…”