Sung Gyun Mun

The unpredictable nature of crises poses a significant challenge to the operation of businesses. Hotels often resort to reactive measures, specifically cost reduction strategies, as their primary means of surviving a crisis. Despite the challenges that firms often face in determining which expenses to prioritize to improve their chance of survival, no prior studies have delved into this pressing matter. Thus, this study applied machine learning classification models to prove which expense should be targeted for cuts first to increase the odds of surviving a crisis. We proposed that food and beverage salaries were the most important operating expense as a determinant of a good-performing hotel during the COVID-19 crisis, and marketing expenses were the second most important operating expense. We also found that the relative importance of hotel operating expenses had changed before and during COVID-19.

When a hotel decides to open in a new location, it must select a specific entry mode that determines its degree of control and ownership. This study combines agglomeration theory with information economics to explain how hotel agglomerations influence the entry modes of new hotels. In particular, we argue that when facing different levels of information asymmetry derived from hotel agglomerations, new hotels should reduce the risk of adverse selection in choosing their entry modes. Using a sample of new hotels in China, this study shows that in areas of co-located higher-quality hotels, new hotels choose shared-control modes (franchise or management contracts) over full-control modes. Evidence from a sample of foreign hotels also indicates that in areas of co-located same-country-of-origin hotels, new hotels are encouraged to choose shared-control modes (franchise or management contracts) over full-control modes.

Weather is one of the critical factors that influence tourists’ destination choices and activities. Apart from ambient temperature anomaly, rain anomaly is also an important factor considered by tourists when they plan and modify their vacation and holiday trips. This study confirms the important role of abnormal weather conditions in explaining hotel performance, such as occupancy, average daily rate, and revenue per available room. Moreover, operational performance indicators are observed to exhibit dynamic patterns in response to abnormal weather conditions in accordance with different types/classes of hotels. Evidence indicates that tourists prefer to stay at full-service hotels with complete facilities rather than at hotels with limited facilities and services during an abnormally heavy rain situation. Therefore, the findings of this research suggest a useful determinant (i.e., weather changes) of revenue management practices for hotel firms to maximize their operating performance.

This study identifies whether profit-driven or growth-driven mergers and acquisitions (M&As) are more beneficial to a restaurant firm aiming to achieve profitable growth after an M&A. The results indicate that despite the challenges that must be overcome to achieve profitable growth through M&As, profit-driven acquiring firms are more likely to have better post-M&A operational performance than growth-driven acquiring firms. Therefore, this study suggests that when restaurant firms seek to grow their business through M&As, they should pursue this goal after achieving higher operational profitability, along with better cost controls, supply management, and marketing strategies, rather than optimistically adhering to growth strategies before accumulating any internal, market-based competitive strengths.

Many business leaders have the tendency to vigorously pursue rapid firm growth, but this focus is often criticized as problematic in terms of operating performance. Accordingly, this study suggested that the asset growth anomaly is an inevitable phenomenon for growing restaurant firms: operating profitability increases as assets grow to the optimum level and then decreases after this level. However, most restaurant firms invest their capital below the optimum level, and only a small number of restaurant firms increase their assets too rapidly. Further, the amount of a chief executive officer’s (CEO’s) bonus payments motivates their investments in asset growth, while the amount of stock options increases the probability of overinvestment practices in restaurant firms. Therefore, even though overinvestment practices are not apparent in most restaurant firms, an appropriate proportion of equity-based incentives is beneficial to prevent overinvestment practices by a few restaurant firms to avoid negatively impacting shareholders’ wealth.

Motivated by growing attention to the agency problems of institutional investors, along with recent changes that have identified real estate investment trusts (REITs) as a separate industry segment, this study investigates the impacts of institutional ownership on the firm value of hotel REITs. Hotel REITs provide unique regulatory and operational settings in which it is appropriate to investigate the potential adverse consequences of institutional investments on firm value. This study performs additional analyses using non-REIT hotel corporations (hotel C-corporations) for comparison. After testing pooled ordinary least squares, fixed and random effects, and two-stage least squares in quadratic models, the results of the random effects models are found to be valid and are thus adopted to examine the hypothesized relationship. The analysis showed a U-shaped relationship between institutional ownership and firm value (as measured using Tobin’s q) but a dominantly negative relationship in the majority of observations, whereas no significant relationship is found for hotel C-corporations.