William P. Andrew

Forecasting Hotel Occupancy Rates with Time Series Models: An Empirical Analysis

This study examines empirically the use of two time series models, Box-Jenkins and exponential smoothing, for forecasting hotel occupancy rates. The models are fitted and tested using actual monthly occupancy rates for a major center-city hotel. Both models show a high level of predictive accuracy. Since these models are relatively easy to implement, they should be very useful in actual hotel operations and other applications such as yield management.

A comparison of time series and econometric models for forecasting restaurant sales

Abstract Historically, forecasting of restaurant sales in the hospitality industry has been ‘judgementally’ based. Given the importance of both short-term and long-term sales forecasts for effective restaurant management, we have investigated various forecasting models for accuracy and efficiency. The results of the study show that for the actual restaurant sales in this sample, time series models (specifically Box-Jenkins and exponential smoothing models) performed as well or better in forecasting sales than an econometric model. Since time series models (especially exponential smoothing models) are typically more economical in terms of time and skill levels of the users, the results of this study have important implications for the use of forecasting techniques in the restaurant industry.

Agency problems and hotel appraisal accuracy An exploratory study

Abstract The purpose of this paper is to examine agency problems in the hotel appraisal process. The results support the notion that information asymmetry and moral hazard had significant effects on appraised hotel values. The paper examines the differences between appraised hotel values and their sales prices and finds that agency problems help explain the differences. T-tests are used to show that appraised values are significantly less than sales prices during a period of significant information asymmetry surrounding the Tax Reform Act of 1986. Conversely, appraised values are significantly greater than the sales prices during the late 1980s, a period encompassing moral hazard problems for commercial lenders. Three ordinary least-squares regression models are used with time period and lender type as independent variables to explain these differences. Both variables are found to be highly significant in the full regression model.

Hospitality education and the technological revolution.

New advances in technology pervade nearly every aspect of our society, and hospitality is certainly no exception. Hospitality graduates entering the field find themselves surrounded by computerized point of sale, bar management, hotel reservation and front office, energy management, menu scoring, and accounting and inventory systems, along with such computer-controlled cooking equipment as friers and microvraves. Unfortunately, many of these hospitality graduates lack a basic understanding of how this technology will affect their professional roles or the overall direction of the industry. Thus, it is critical that hospitality education programs place more emphasis on providing their students with this understanding. To be able to do this efficiently and effectively, however, we need to understand the reasons why difficulties presently exist and how they may ultimately be resolved.

Decision modeling using simulation: a hospitality perspective

Abstract This article reviews the use and role of simulation as a decision-modeling technique in the hospitality industry. While simulation modeling currently appears to be used primarily by academic institutions and large hospitality firms, new advances in computer hardware and software should mean it will see much greater use in the future as a management decision technique for smaller hospitality operations. The article outlines a systematic six-step process for constructing and evaluating such simulation models and provides an example of the use of this process for modeling a small food-service operation.

Explanations for the Predominant Use of Cash Financing in Hospitality Acquisitions

ABSTRACT Seventy-five percent of hospitality acquisitions from 1980 to 2000 were cash-financed. In other industries, this figure was 43 percent. Since the choice of cash versus stock financing can have a significant effect on a hospitality acquirers capital structure, the purpose of this study was to examine possible explanations for the high level of cash financing used in hospitality acquisitions. The results indicate that in both the hotel and restaurant industries, the use of cash payments in acquisitions is positively related to the acquiring firms debt ratio. Firm size is also positively related to the use of cash payments, but only in the restaurant industry. Free cash flow and internal growth opportunities do not appear to be significant determinants of the use of cash payments in acquisitions in the hospitality industry.

Evidence for Weak-Form Market Efficiency in Hotel Real Estate Markets

The purpose of this study is to test for evidence of weak-form market efficiency in hotel real estate markets by measuring how rapidly price changes diffuse in geographically proximal areas. Using autocorrelation and cross-correlation analysis, we found that there is little evidence that past hotel prices predict future hotel prices in the same city as well as neigh- boring cities. In addition, buy-and-sell trading strategies based on the information in past hotel prices did not earn higher returns than buy-and-hold strategies. The results of this study are supportive of the existence of weak-form market efficiency in the pricing of hotel real estate.

Sub-franchising: A multi-unit alternative to traditional restaurant franchising.

Sub-franchising is a variation of the classic relationship between a franchisor and franchisees. A franchisor contracts with a sub-franchisor to expand the franchisors system in a given territory. The sub-franchisor pays a stated royalty to the franchisor for the right to use its trademarks, proprietary products, and business systems in selling franchises. The subfranchisor then performs all the functions of the franchisor in its territory. This allows the franchisor to expand more rapidly than it could do singlehandedly. However, the franchisor may lose control of its system, because the sub-franchisors are responsible for monitoring and servicing franchisees. Chains using sub-franchising tend to be smaller than those that do not. Systems using sub-franchisors have lower initial royalties than chains using only direct franchising, but subsequent royalties are often higher.

Factors that Impact Unsystematic Risk in the U.S. Restaurant Industry

The purpose of this research is to explore the relationship between restaurant management factors and the unsystematic risk portion of restaurant stock returns. The riskiness of the restaurant business has been brought to the forefront of popular culture through a number of reality television shows. Although the riskiness of the business overall has been exaggerated, these shows highlight the importance of the ability of the owner-manager. We examine three critical areas of restaurant management, including financial management, operations management, and firm size, and find that all are significantly related to a firms unsystematic risk.

Information Asymmetry Around Hospitality Merger Announcements

ABSTRACT The purpose of this study is to examine the effect of information asymmetry on insider trading activities in hospitality firms. In particular, this study will use a market micro structure approach to detect insider trading activities of hospitality firms prior to merger announcements. Since the payment type of a merger is determined by private managerial information, it can act as a proxy of information asymmetry. Depending on the payment type of a merger, insiders may make different transactions with their private share holdings before the merger announcement. Insider selling (buying) activities may forecast their firms negative (positive) abnormal performance after mergers.