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The Effect of Quality on Hotel Risk

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  • Juan L. Nicolau
  • Ricardo Sellers

Abstract

Analysis of the variation – increase or decrease – in the risk to a hotel chain's performance of the introduction of a new quality system is a crucial aspect of decision making. With this in mind, this paper detects changes in such risk deriving from the implementation of quality systems signalled by quality awards. The authors analyse this issue in the Spanish hotel market by employing autoregressive conditional heteroskedasticity models. The results show that, in the short term, the increase in fixed costs derived from quality systems is higher than the augmentation in sales; that is, there is an increment in the operating leverage and the firm's operational risk.

Suggested Citation

  • Juan L. Nicolau & Ricardo Sellers, 2011. "The Effect of Quality on Hotel Risk," Tourism Economics, , vol. 17(1), pages 39-52, February.
    • Handle: RePEc:sae:toueco:v:17:y:2011:i:1:p:39-52
    DOI: 10.5367/te.2011.0021
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    References listed on IDEAS

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    Cited by:

    1. Nicolau, Juan Luis & Sharma, Abhinav, 2022. "A review of research into drivers of firm value through event studies in tourism and hospitality: Launching the Annals of Tourism Research curated collection on drivers of firm value through event stu," Annals of Tourism Research, Elsevier, vol. 95(C).

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