Ersem Karadag

The characteristics of IT investment decisions and methods used in the US lodging industry

Purpose – The purpose of this study is to examine and to compare the most utilized information technology (IT) investment decision methods between hotels with centrally managed IT, and hotels with locally managed IT.Design/methodology/approach – The empirical data were collected via a structured questionnaire from hotel managers in the USA.Findings – The key findings of the research are that evaluation activities for hospitality IT investments have not been performed widely and consistently. Although sophisticated evaluation methods have been developed over the years, they do not appear to have provided a satisfactory answer to improve IT decision‐making practice. In this study, significant differences were found in how IT investments are evaluated in hotels with centrally managed IT as compared to hotels with locally managed IT. The hotels with centrally managed IT tend to use more financial and non‐financial evaluation methods since all investments are expected to show a positive return on investment.Pr...

The productivity and competency of information technology in upscale hotels: the perception of hotel managers in Turkey.

Purpose – This paper aims to examine and analyze the findings of an empirical survey of the productivity of guest‐related IT applications and perceptions of hotel managers on IT competency in upscale hotels in Turkey.Design/methodology/approach – The data is collected via a structured questionnaire from 122 upscale hotels in Turkey.Findings – The findings of this study show that hotel managers view guest‐related IT applications as highly productive and appreciate ITs benefits. It seems there is a strong relationship between guest‐related IT applications and productivity in the lodging industry.Research limitations/implications – This study reflects the perception of hotel managers working in a specific country, i.e. Turkey (and only upper class hotels).Practical implications – This study provides a useful insight for hoteliers to understand the productivity dimensions of guest‐related IT applications. This understanding will shape the patterns of decision makers when considering the adoption of certain t...

Corporate governance provisions and firm financial performance: The moderating effect of deviation from optimal franchising

Purpose Borrowing from arguments of agency theory, the present study aims to investigate the moderating effect of the deviation from optimal franchising on the relationship between corporate governance provisions and firm financial performance. Design/methodology/approach The sample consists of 35 publicly listed US restaurant firms for the 1990-2008 period. The study uses a hierarchical regression with cross-sectional time-series fixed effects. Findings The results show that the deviation from optimal franchising worsens the negative relationship between corporate governance provisions and firm performance. Research limitations/implications The availability of governance data restricts our sample to large publicly listed firms in the US restaurant industry, limiting the ability to generalize results for small and privately held restaurant firms. Practical implications Firm executives should not only pay attention to which corporate governance provisions they adopt but also strive to maintain an optimal level of franchising. Originality/value The key contribution of this study to governance literature is that this study demonstrates how the presence of multiple governance mechanisms influences firm performance.

Risk-adjusted performance of three restaurant segments in the USA.

This study evaluates the risk-adjusted performance of three restaurant segments between 1 January 1998 and 31 December 2004. The Jensen, the Treynor and the Sharpe indexes were adopted as an analytical framework. The findings here are not entirely consistent with those of Kim and Gu (2003) because they show that the quick-service segment outperforms the other two segments. However, using NASDAQ, NYSE and S&P 500 as benchmarks, this study illustrates that the performance of the economy/buffet segment tops the quick-service and full-service segments. It further indicates that the restaurant industry carries too much unsystematic risk, which it needs to reduce.

Exiting the Public Scene and Becoming Private: The Magnitude of Bid Premiums in the U.S. Restaurant Industry

This article reports the shareholder wealth effects of restaurant firms going private. In addition, this study uncovers firm characteristics that influence the magnitude of the stock bid premiums. This study includes 27 publicly traded restaurant companies that went private between 1995 and 2004. The findings indicate that shareholders of restaurant firms that were taken private enjoyed a highly positive, abnormal return of 26%. Cluster analysis demonstrated that high-premium restaurant firms had higher market-to-book (MB) ratio and cash holdings, lower debt, and market capitalization. A logistic regression model which consisted of cash holdings and debt-to-equity variables successfully classified more than 75% of firms into low and high-premium firms.

Estimating Cost of Equity in the Restaurant Industry: What IS Your Required Rate of Return?

ABSTRACT Accurate estimation of cost of equity is critical when making capital investment decisions to allocate valuable corporate resources. While the importance of proper estimation of required rate of return of an investment project is well documented, challenges surrounding estimation of the cost of equity still abound. This paper empirically evaluates the viability of common cost of equity models to estimate required rate of return for the U.S. restaurant industry for the 1996–2010 period. The full model, which consists of five risk factors, emerges as the soundest cost of equity model for the U.S. restaurant industry. We recommend that future studies assess the performance of cost of equity models in other countries and other segments of the hospitality industry.

The Road to IFRS Convergence in the U.S.: What It May Mean for the Hospitality Industry

ABSTRACT The United States decided to implement IFRS for its publicly traded companies. The road map calls for the SEC to decide how to proceed to the mandatory use of IFRS in 2011. Developing a plan around IFRS implementation is becoming increasingly important for hospitality companies. The research institute of Hospitality Financial and Technology Professionals has published a white paper discussing the impact of the convergence of the IFRS on the hospitality industry. The transition from U.S. GAAP to IFRS will certainly cause some challenges for publicly traded lodging companies. The question is whether individual lodging properties, which mainly use USALI as a guide for financial transactions, will be affected by this transition.

Private Equity and Lodging firm Stock Values: is Beauty in the Eye of the Beholder?

ABSTRACT Over the last five years, the hospitality industry has witnessed an exceptional level of transaction activity, changes in hotel ownership, and new management structure. There is a common belief that the combination of low interest rates, depressed stock prices, and rising corporate profits created ideal conditions for private equity firms to flourish. This study argues why publicly traded lodging companies became the targets for private equity firms, and also discusses why private equity firms place a higher value on hotel firms that possess strong brands and higher degrees of intangible assets. On one hand, some scholars claim that private equity funds invest in hotel real estate as a financial asset, and the main reason for investment is to sell the hotel properties for a higher price in the future. Others contend that the market is completely out of touch with economic reality and unlimited funds in the market are seeking a safe home. This article does not offer a conclusion for the hotel valuation argument, but rather sheds some light into the current phenomenon of private equity. It seems that, at this stage, it is not feasible to use inferential statistical analysis to uncover the reasons hotel companies became targets of private equity buyouts. However, by using some of the extant industry body of knowledge, the researchers develop two key propositions that they hope will spur research in this area. The authors conclude that more insight is needed to understand the current investment phenomenon brought onto the scene by private equity firms over the last five years.

Estimating the Cost of Equity in the Restaurant Industry: The Influence of Index and Variable Selection

ABSTRACT Estimating the required rate of return for a project is a challenging issue that is on the agenda of almost any hospitality manager. The motivation of this paper is to assess the performance of the various cost of equity variables and the influence of market index selection on the cost of equity estimates in the restaurant industry. The observation period of this study is between 2000 and 2004 and the sample entailed 81 restaurant firms. Three market indices—Equal Weight Return Index of CRSP (EWCRSP), Value Weight Return Index of CRSP (VWCRSP), and Standard & Poors (S&P) 500—and five cost of equity variables—Fama-French (three variables), momentum (UMD), and liquidity—were used in this study. In all instances, the Fama-French (FF) model resulted in a significant R2 change over the CAPM which showed that the two Fama-French variables (SMB and HML) explained some extra variance over and above the CAPM. The full five-variable model performed worse than the FF model for all market indices. As a result, it is recommended that restaurant executives/entrepreneurs use the FF model by averaging the cost of equity estimates of the three market indices.