Key Ratios for Long-Term Prediction of Hotel Financial Distress and Corporate Default: Survival Analysis for an Economic Stagnation

Antonio Pelaez-Verdet and Pilar Loscertales-Sanchez
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Antonio Pelaez-Verdet: Department of Business and Economics, University of Málaga, 29016 Málaga, Spain
Pilar Loscertales-Sanchez: Department of Business and Economics, University of Málaga, 29016 Málaga, Spain

Sustainability, 2021, vol. 13, issue 3, 1-17

Abstract: Hospitality companies often face economic crises, which stress their financial structure. In 2008, Spanish hotels were jeopardized when the travelers’ flows became stagnated, in either domestic and foreign markets. Most of them overcame the crisis, but not all, in part depending on their capital structure at the moment the downturn loomed upon them. This study analyzes the financial ratios registered in 2008 by 3.341 Spanish lodging enterprises, to find out the most relevant ratios that were associated with an eventual breakdown. The analyzed ratios have been largely suggested by previous literature for anticipating financial distress; however, using survival tables and Kaplan–Meier estimates we could also find new insights about several promising variates for future research. In the end, by performing a Cox regression, we could isolate the return on capital employed (ROCE) ratio as a long-term predictor for small hotels’ bankruptcy after a market downturn. Moreover, the legal status seems to be a key predictor concerning medium-sized hotels.

Keywords: ratio analysis; hotels; 2008 crisis; survival analysis; profitability ratios; structure ratios; breakdown prediction; return on capital employed (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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