The economy, tourism growth and corporate performance in the Taiwanese hotel industry

This study investigates the impact of economy and tourism growth on the corporate performance of tourist hotels in Taiwan. The indicators of corporate performance under consideration are occupancy rate (OPR), return on assets (ROA), return on equity (ROE), stock return, and the overall financial performance measured by a comprehensive score (a combined measure of asset management, profitability, short-term solvency or liquidity and long-term solvency based on factor analysis). The effects of changes in the state of economy (real GDP growth rate, Delta GDP) and tourism growth (growth rate of total foreign tourist arrivals, Delta TA) on the corporate performance of tourist hotels are then examined via panel regression tests. Test results show that both Delta GDP and Delta TA are significant explanatory factors of OPR, but only Delta TA can strongly explain ROA and ROE. However, neither Delta GDP nor Delta TA have a significant influence on hotel stock performance. Further, the economic factor (Delta GDP) is slightly more crucial than the industry factor (Delta TA) in describing the overall financial performance in the Taiwanese hotel industry. Empirical findings offer valuable information for government tourism policymakers and tourist hotel owners and managers. (C) 2009 Elsevier Ltd. All rights reserved.