A financial model for measuring hotel performance

Brett William Horton, Purdue University


The purpose of this study was to develop a hotel performance model using structural equation modeling. All hotel firms with a SIC code of 70, with available data for 1996, were used. A total of 106 hotel, hotel and gaming, and hotel conglomerates were included in this study. A model was proposed and tested using four environmental dimensions: growth capacity, instability, diversification, and size. These dimensions affected two performance dimensions—accounting and financial market performance. The accounting and market constructs were found to be distinct, according to confirmatory factor analysis. The measurement portion of the model revealed only an adequate fit to the data (GFI = 0.8598). However, one or more indicators were found to be a significant (p < 0.001) measure of each of the dimensions. Growth capacity as measured by a firm's long-term debt ratio and its debt to equity ratio was found to significantly (p < 0.001) affect a firm's accounting performance as measured by its equity multiplier. This study provides a foundation from which further research can be conducted on the type of environmental constraints that affect hotel firm performance. ^




Major Professor: Thomas E. Pearson, Purdue University.

Subject Area

Business Administration, Management|Economics, Commerce-Business|Economics, Finance

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