The impact of COVID-19 outbreak on hotels' value compared to previous diseases: the role of ALFO strategy

Conrado Diego García-Gómez; Ender Demir; José María Díez-Esteban; Yuriy Bilan

doi:10.1016/j.heliyon.2021.e07836

The impact of COVID-19 outbreak on hotels' value compared to previous diseases: the role of ALFO strategy

Heliyon. 2021 Aug 19;7(8):e07836. doi: 10.1016/j.heliyon.2021.e07836. eCollection 2021 Aug.

Authors

Conrado Diego García-Gómez¹, Ender Demir², José María Díez-Esteban³, Yuriy Bilan⁴

Affiliations

¹ University of Valladolid - Duques de Soria Campus, Department of Financial Economics and Accounting, Calle Universidad s/n, 42004, Soria, Spain.
² Reykjavik University, Department of Business Administration, School of Social Sciences, Menntavegur 1 IS-102, Reykjavik, Iceland.
³ University of Burgos, Department of Economics and Business Administration, Pza. Infanta Elena, 09001, Burgos, Spain.
⁴ Tomas Bata University in Zlín, Faculty of Management and Economics, 5139 Mostni Str., Zlin, 760 01, Czech Republic.

Abstract

By using the Event Study Method (ESM), this paper aims to examine the effect of new coronavirus (SARS-CoV-2) disease (COVID-19) outbreak on the market performance of the hotel industry in the U.S. We also compare the impact of COVID-19 outbreak with three previous diseases outbreaks. The results show that there is a negative influence of the diseases outbreaks on stock returns of hotels in the U.S. However, the impact of COVID-19 is incomparably higher in magnitude compared to previous diseases. Furthermore, given the importance of following flexible corporate strategies to adapt to new and unpredicted situations, it is found that the ALFO (assets-light, fee-orientated) strategy acts as a mitigator for the predicted market value drop due to the pandemic.

Keywords: COVID-19; Event study; Hotel financial performance; Pandemic outbreak.