Recent Trends in the Hospitality Industry

REFEREED ARTICLES

 Insider Trading Prior To Hospitality Acquisition Payment Type Announcements

Seonghee Oak and William Andrew

Insider trading prior to firm acquisition announcements has been a subject of recurring interest for finance researchers and academicians. This study uses the event study methodology to examine the level of abnormal insider transactions prior to cash, stock and mixed acquisition payment announcements in lodging and restaurant firms for the period 1983-1999. Results show that at least for the test period, abnormal insider sales were significantly positive in four quarters prior to acquisition announcements involving mixed financing (cash and stock). As such the phenomenon of insider trading activities in hospitality firms prior to acquisition payment announcements is better understood.

 Major Influences on the Ethical Behavior of Financial Executives in the Hospitality Industry

James W. Damitio and Raymond S. Schmidgall

Ethical issues in the behavior of financial executives have been a subject of recurring interest during recent years. This paper examines salient factors affecting the ethical behavior of financial executives in the hospitality industry. A random sample of hospitality financial executives was asked to indicate how strongly their ethical belief system was influenced by various family factors as well as institutional factors.  Respondents also reported on how strongly their ethical belief systems were influenced by various college or university courses that they completed. Findings in the study indicate that parents are by far the most important influence on controller’s ethical behavior.  Spouses rank as the second most important influence followed by immediate supervisors at work. These influences, however, did not appear to make a large difference in how financial executives responded to hypothetical ethical dilemmas. 

Cash Dividend Announcements and Abnormal Returns in Lodging and Restaurant Sectors

             Yi Zhong and Atul Sheel

 Dividend relevance has been a subject of significant recent interest for academicians and researchers in the area of hospitality finance. The subject has attracted noticeable controversy, given the stringent or no-dividend payout policies observed in many hospitality firms. This study builds on existent dividend literature in hospitality finance by examining the relevance of cash dividends for public lodging and restaurant firms in US equity markets. It uses the event study approach to investigate abnormal returns for lodging and restaurant firms caused by cash dividend announcements during the period 1994 – 2002. Results are suggestive of the fact that at least during the test period, cash dividend increases were positively received by equity holders in both lodging and restaurant sectors. Results also suggest that dividend effect and abnormal returns were significantly different for the two sectors. As such the issue of dividend relevance in hospitality firms and the need for more prudent dividend policies in these firms is better understood.

The Relationship between Return on Equity, Financial Leverage and Firm Size – An Examination of Restaurant Firms

Eunju Yoon and SooCheong Jang

This study presents an empirical insight into the relationship between return on equity (ROE), financial leverage and size of firms in the restaurant industry for the period 1998 to 2003 using OLS regressions. Research results suggest that at least during the test period firm size had a more dominant effect on ROE of restaurant firms than debt use, larger firms earning significantly higher equity returns. Results also suggest that regardless of having lower financial leverage, smaller restaurant firms were significantly more risky than larger firms.  As such, the dominance of size effect in the ROE-financial leverage relationship within the restaurant industry is better understood.

Ratio Analysis for the Hospitality Industry: A Cross Sector Comparison of Financial Trends in the Lodging, Restaurant, Airline and Amusement Sectors

         Woo Gon Kim and Baker Ayoun 

 This study uses ratio analysis to examine salient financial trends within four major sectors of the hospitality industry for 1997-2001 – namely lodging, restaurants, airlines and the amusement sectors. Cross-sectional analysis results indicate that at least for the test period, eight out of thirteen financial ratios were statistically different across the four hospitality segments. As such, financial trends and cross sectional anomalies within the examined hospitality industry segments are better understood.

INVITED ARTICLES

 AHFME Academic Member 2003 Total Annual Earnings Survey

     Raymond S. Schmidgall

 This study was conducted to determine the 2003 annual earnings of hospitality financial management educators.  Fifty-seven percent of AHFME’s members affiliated with educational institutions responded.  Annual base salaries ranged from $33,000 to $172,000.  The lowest-paid member is an instructor while the highest-paid member is a full professor.  Most respondents supplement their base salaries by both teaching during summer school and consulting.  The total annual earnings of members ranged from $33,000 to $252,000.  Hospitality financial management educators appear to be more highly compensated than hospitality industry financial executives.

TEACHING TOOLS 

 A Computer Software Approach to Teaching Hospitality Financial Accounting

             James F. Downey and Linsley T. DeVeau

 Teaching hospitality financial accounting can be more interesting and more effective if instructors employ computer software applications in their classrooms. This paper illustrates the use of one such software application, the Prentice Hall General Ledger (PHGL) Program, and explains the merits of using PHGL as a pedagogical tool in hospitality financial accounting classes.

VIEWPOINT

 The Extent of Foreign Direct Investments (FDI) in the Tourism Sector of Northern Cyprus

            Okan Veli Şafakli

 Amidst the clamor of unstable political and economic developments, unrecognized political status and embargos by several countries, the foreign investment climate in Northern Cyprus is extremely challenging. Within the tourism sector of Northern Cyprus, foreign investments are quite rare and are channeled in favor of bigger, more established operations. This study examines the extent of foreign direct investments (FDI) for the tourism sector of Northern Cyprus and recommends ways to optimize the economic value of such investments. Findings reveal that the economic value of FDI in Northern Cyprus could be optimized either by further strengthening the region’s current integration with Turkey, or by adopting the European Union route for its economy.

BOOK REVIEW

 Chatfield, R.E. and Dalbor, M. C. Hospitality Financial Management. Upper Saddle River, New Jersey: Pearson Education, Inc., 2005.

ABSTRACTS OF PRESENTATIONS AT THE 2004 ANNUAL AHFME RESEARCH SYMPOSIUM

 True Market Value of Lodging Stocks: A Convergence Approach

Nan Hua & Arun Upneja

 An Analysis of the Major Equity Valuation Models as Applied to the Lodging Industry

Arun Upneja & Seoki Lee

 Does Wall Street Truly Understand the Lodging Valuation?

Seoki Lee & Arun Upneja

 Detecting Informed Trading around Hospitality Acquisition Announcements using the Market Microstructure Approach

Seonghee Oak & William Andrew

 Empirical Investigation of the CAPM Vs. Fama – French Model: Evidence from the Lodging Industry

Melih Madanoglu, Michael D. Olsen & Francis A. Kwansa