Internationalization and Financial Health in the US Hotel Industry

Abstract

This study examines two main hypotheses regarding the internationalization and financial health of publicly traded US hotels from 1990 to 2010. First, the study hypothesizes that international US hotels are financially healthier than domestic US hotels. The findings support the hypothesis after controlling for other potential confounding factors: a firm's growth opportunity, profitability, size, leverage, capital intensity and economic conditions. Next, the study tests the second hypothesis, that international US hotels face a great challenge in terms of their financial health as they enter foreign markets due to the many unknown factors in such international settings. However, it is expected that the internationalization strategy will gradually provide more benefits as the firm increases its degree of internationalization, and thus that benefits will eventually outweigh costs, leading to a U-shaped relationship. The study's findings support this curvilinear U-shaped relationship within the dataset of internationally operating US hotels.

The Effect of Internationalization on Firm Performance: A Moderating Role of Heterogeneity in TMTs’ Nationality

“…For example, we found a positive effect of all internationalization measures on firms' market performance (i.e., Tobin's q) while some of previous researchers found a negative effect of internationalization on firms' market returns (e.g., Collins, 1990). We also found that the effect of internationalization on firms' operational returns depends on the measures of internationalization, while other researchers suggested a positive effect of internationalization on firms' operational returns (e.g., S. Lee et al, 2014).…”

“…S. Lee (2008) and Tang and Jang (2010) found a U-shaped relationship with a sample of U.S. hotel companies. Later, S. Lee et al (2014) showed that international hotels have better operational performance than domestic hotels in U.S. Regarding the restaurant industry, Singh et al (2003) found a positive relationship between internationalization and firm performance (measured by operating income growth and pretax profitability).…”

Hotel chains and sustainable development: degree of internationalization, SDGs and dynamic capabilities as drivers of successful performance

“…Different studies have investigated the effect of international decisions in different contexts, including the tourism industry. In fact, many papers noted the positive influence of internationalization and results in terms of different indicators: ROA (Lee et al, 2014a;Menicucci, 2018;Rienda et al, 2020), Tobin's Q (Lee, 2008;Lee et al, 2014b), sales growth (Rienda et al, 2020), and revenue per available room (Higgins & Higgins, 2006;Ismail et al, 2002;Menicucci, 2018;Woo et al, 2019), among others.…”

“…However, debate continues about the better perform of companies in international markets (Woo et al, 2019). Some papers focused on this relationship find a non-linear U-shaped relation (Assaf et al, 2016;Lee et al, 2014a;Woo et al, 2019), finding that firms achieve higher profits by having accumulated international experience and learning, or an inverted U-shaped relationship when chains make too many investments abroad, requiring large financial efforts and negatively impacting their business results (Brida et al, 2016). Notwithstanding the above, following the organizational learning theory -closely linked to the theory of DCs -, the development of knowledge, either by adapting resources and capabilities or by creating new ones, could explain the influence of firm internationalization on performance (Ruigrok & Wagner, 2003).…”

“…In fact, the ever-changing environment faced by tourism companies in recent years and the multiple challenges they have to face have led to the consideration of other intermediate variables. These variables include size, ownership structure, the strategy followed or the economic conditions of the environment itself (Lee et al, 2014a;Lin & Chen, 2022;Menicucci, 2018). The influence of these variables is such that internationalizing alone has ceased to be decisive for business performance, as it should be combined with other strategic decisions around adjusting to the needs and new demands of the environment, a situation that is well reflected tourism sector (Assaf et al, 2016;De Correia et al, 2019).…”