Debt Financing and Financial Performance in the Hospitality Industry: Evidence from Hotels in Livingstone, Zambia

Mutinta Kalima, Chibulo Foster Mwachikoka and Lubinda Habazoka
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Mutinta Kalima: University of Zambia
Chibulo Foster Mwachikoka: University of Zambia
Lubinda Habazoka: University of Zambia

African Journal of Commercial Studies, 2026, vol. 7, issue 3

Abstract: The hospitality industry in Livingstone District has experienced significant growth due to increased tourism associated with Victoria Falls. However, hotel operations require substantial capital investment for infrastructure development, service improvement, and operational expansion. As a result, many hospitality businesses rely on debt financing such as bank loans and credit facilities. Despite the widespread use of debt financing in the hospitality sector, limited empirical evidence exists on how borrowing influences the financial performance of hotels in Zambia. This study therefore examined the relationship between debt financing and financial performance among hotels operating in Livingstone District, Zambia. The study was guided by three objectives: 1. to determine the relationship between debt financing and financial performance indicators of hotels; 2. to examine the impact of debt financing on the operational growth of hotels; and 3. to explore the experiences and challenges faced by hotel managers regarding the use of debt financing. The study adopted a pragmatic research philosophy and employed a mixed-methods research design combining quantitative and qualitative approaches. A sample of 60 respondents consisting of hotel owners, general managers, and finance managers was selected using purposive sampling. Primary data were collected through semi-structured interviews, while secondary data were obtained from hotel financial statements covering the period 2018–2022. Quantitative data were analysed using descriptive statistics, correlation analysis, and regression analysis, while qualitative data were analysed using thematic analysis. The findings revealed strong positive relationships between debt financing and financial performance indicators, including revenue, Return on Assets (ROA), Return on Equity (ROE), and Gross Profit Margin (GPM). The results indicate that moderate and well-managed debt financing enables hotels to invest in infrastructure development, improve service quality, and enhance profitability. The study concludes that debt financing plays a significant role in supporting operational growth and financial sustainability in the hospitality sector.

Keywords: Debt Financing; Financial Performance; Hospitality Industry; Profitability; Livingstone (search for similar items in EconPapers)
JEL-codes: G32 L83 M21 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:cwk:ajocsl:2026-028

DOI: 10.59413/ajocs/v7.i3.57

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