Equipment Leasing in the U.S. Lodging Industry

The real estate risk of hospitality firms: Examining stock-return sensitivity to property values

“…In many ways the lessee has the benefits and risks associated with the capitalized lease, which are similar to owning real estate, while the lessor has a mere security interest. Upneja and Schmidgall (2001) also noted that ownership transfer and bargain purchase options are the major drivers of capitalizing leases for hotel financial managers, indicating a common motivation for ownership and capitalized leases. Therefore, Hypothesis 1 was formed as follows: Hypothesis 1.…”

Business Cycle and Long-Term Debt: Effects on Hotel Operating Lease

“…Using operating leases also displaces many risks and responsibilities from hotel operators to asset owners. Upneja and Schmidgall (2001) revealed that equipment leasing offers hotels protection from obsolescence as well, allowing constant upgrades to equipment and supply assets. Operating leases require shorter lease terms compared to the useful life of the asset, making obsolescence a non-factor for the hotel.…”

“…Operating leases require shorter lease terms compared to the useful life of the asset, making obsolescence a non-factor for the hotel. Additionally, a hotel does not have to worry about disposal of the asset and has relatively more frequent opportunities to upgrade the asset (Jiang & Schmidgall, 2011;Upneja & Schmidgall, 2001).…”

“…Over the last 25 years, many hotel operators have increasingly used leases instead of incurring long-term debt and owning the property outright (Koh & Jang, 2009;Siguaw & Enz, 1999;Whitford, 1998). Hotel firms tend to favor operating leases on certain properties, including land, institution, and equipment (Upneja & Schmidgall, 2001;Whittaker, 2008). Many incentives for using operating leases have been the subject of research, and one strong motive for leasing involves financing strategy (Koh & Jang, 2009;Whittaker, 2008).…”

Proposed Lease Accounting Changes

“…Previous research has also been hampered by data availability and limited to small sample sizes. Upneja and Schmidgall (2001) noted the limited number of hospitality-related studies on leasing and the lack of hospitality-specific data on the magnitude of leasing activity and have called for more research in this area. Third, a focus on one or two industry sectors has the advantage of not only increasing the ability to detect an empirical relation but also enabling researchers to perform more intraindustry tests of differences.…”