An Examination of US Hotel Segment Strategy: Diversified, Concentrated or Balanced?

Seoki Lee, Qu Xiao and Kyung Ho Kang
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Seoki Lee: School of Tourism and Hospitality Management, Temple University, 1810 North 18th St, 314 Speakman, Philadelphia, PA 19122, USA
Qu Xiao: School of Hotel and Tourism Management, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong
Kyung Ho Kang: College of Hotel and Tourism Management, Kyung Hee University, 1 Hoegi-dong, Dongdaemun-gu, Seoul 130-701, South Korea

Tourism Economics, 2011, vol. 17, issue 6, 1257-1274

Abstract: Segment diversification is a common strategy applied by hotel companies. According to previous research on the modern portfolio theory, a company can reduce risks and thus increase its value with more diversified operations. Such reasoning can certainly apply to the hotel industry in terms of its segment strategy. However, the findings are inconclusive. In particular, other literature argues for more concentrated rather than diversified operations. This study therefore examines the impacts of segment diversification on companies' risk-adjusted performances among publicly traded US hotels. The results suggest that a moderate segment diversification strategy maximizes a company's risk-adjusted performance.

Keywords: segment diversification; US hotel industry; risk-adjusted returns; Sharpe ratio (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:sae:toueco:v:17:y:2011:i:6:p:1257-1274

DOI: 10.5367/te.2011.0086

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