Winners and Losers during the Great Recession

Abstract

One of the factors that separated winning hotels from losers in the recession was the hotels’ management of marketing expenses. By matching a group of 100 winners to 106 losers, based on high or low financial performance during the nadir of the recent recession, the study highlights the effects of marketing expenses as one primary driver of revenue and profit. The study compares the two groups’ revenue and profitability metrics to determine the two groups’ financial performance as the recession wore on. The results of this study show significant differences between winners and losers when measured by top-line indicators (Average Daily Rate [ADR], RevPAR, TRevPAR) and profitability (GOPPAR and NOIPAR). Winners were also found to spend significantly more on marketing than losers. The relationship between marketing expenditures and performance is significantly positive, with franchise expenses and other sales expenses emerging as the most important determinants of RevPAR, GOPPAR, and NOIPAR. In particular, these results highlight the importance of personal sales efforts, including promotions, familiarization trips, trade shows, and the training of sales personnel, personal sales visits to clients, and use of outside sales representatives to help hotels thrive in a recession. These data lead to the conclusion that firms that “invest” in marketing, especially in tough times, can achieve a payoff via various revenue drivers (e.g., trade shows) and will realize gains beyond just the short term.

Meta-analytically linking the marketing mix to hospitality organizations’ performance

“…A handful of studies (e.g., Kim & Lee, 2020;Koh et al, 2009b) have identified insignificant correlations between marketing expenditure and firms' financial performance (e.g., Tobin's q and return on assets). However, in line with most of the hospitality marketing literature (e.g., Hua et al, 2020;Pansiri, 2008;Singh & Dev, 2015;Wu, 2004), we expect to observe a positive relationship between marketing activities and firm performance. Second, strategic alliances with business partners or suppliers enable hospitality organizations to acquire market-and product-related knowledge by creating strong inter-organizational and cooperative networks (Cho et al, 2019;Wilke et al, 2019).…”

Assessing the impact of the COVID-19 pandemic on tourism workers’ health and well-being in Jordan

“…Previous tourism research has typically looked at the effects of a health or economic crisis, such as the 2003 SARS outbreak and the 2007-2008 recession. However, the majority of these studies have concentrated on the financial or operational consequences of the crisis at the business or market level (e.g., Chen et al, 2007;Zheng, 2014;Singh & Dev, 2015). Using stress process models as a foundation (Kahn, 1981;Pearlin et al, 1981), this study demonstrates a chain of adversity experienced by unemployed and furloughed tourism workers during the pandemic, demonstrating that coronavirus threats, financial impacts, resources impacts and social isolation have resulted in high depression, low personal control, and negative health and well-being outcomes for this group.…”

“…Furthermore, financial difficulties caused significant health and psychological problems for laid-off workers or those on long-term leave (Wanberg, 2012). Several studies have examined the impacts of various economic or health crises, such as Severe Acute Respiratory Syndrome (SARS) in 2003 or the recession in 2007-2008. Most of these studies focused on the financial or operational impacts of the crises (e.g., Chen, Jang & Kim, 2007;Zheng, 2014;Singh & Dev, 2015).…”

Does paying higher franchise fees command higher RevPAR?

“…Similarly, a previous study by Withane (1991) reports that acquiring a proven business format is the main motive for franchisees to select a franchise. In the USA, training support, reasonable independence and acquisition of an established brand name (Peterson and Dant, 1990), together with franchise fees, are shown to be impactful to financial performance (Singh and Dev, 2015), and are, therefore, found to be the main motives for franchisees in selecting a franchise.…”