Leadership Structure and Implications of Partial State Ownership in the Hospitality Sector

Privatization frequently boosts efficiency and productivity in businesses as private companies are generally more motivated to reduce costs, innovate, and meet market needs than state-run counterparts. The privatization of the hospitality sector pertains to the acquisition or operational control of hospitality properties, such as hotels and resorts, including additional services, shifting from government provision to private companies. This shift can have mixed effects on environmental sustainability. This paper delves into the interplay of environmental taxes, pollution control spending, and the privatization of a partially state-owned (PSO) hotel within a mixed duopoly framework. The market we analyze comprises a single partially state-owned (PSO) hotel competing against one for-profit (FP) hotel in a five-stage game: (i) the government decides how much of the PSO hotel will be privatized; (ii) a regulator, aiming to maximize social welfare, establishes the emission tax rate; (iii) the PSO hotel selects abatement pollution investments; (iv) the FP hotel then selects pollution abatement investments; and (v) subsequently, the two hotels concurrently and autonomously determine the quantity of rooms available for reservation. This game presents a model of a policy regime featuring commitment. In contrast, our analysis also considers a non-committed regime, distinguished by the fact that step (ii) occurs after decisions regarding abatement pollution investments. This study’s most significant finding is that, according to the social welfare perspective within the analyzed models, neither total privatization nor complete nationalization represents the optimal governmental strategy.