Are ESG-committed hotels financially resilient to the COVID-19 pandemic? An autoregressive jump intensity trend model

Chun-Da Chen; Ching-Hui Joan Su; Ming-Hsiang Chen

doi:10.1016/j.tourman.2022.104581

Are ESG-committed hotels financially resilient to the COVID-19 pandemic? An autoregressive jump intensity trend model

Tour Manag. 2022 Dec:93:104581. doi: 10.1016/j.tourman.2022.104581. Epub 2022 Jun 6.

Authors

Chun-Da Chen¹, Ching-Hui Joan Su², Ming-Hsiang Chen^{3

4}

Affiliations

¹ Department of Business, College of Business, Lamar University, Beaumont, TX, 77710, USA.
² Department of Apparel, Events, and Hospitality Management, Iowa State University, Ames, IA, 50011, USA.
³ Tourism and Social Administration College, Nanjing Xiaozhuang University, Nanjing, 211171, China.
⁴ School of Hospitality Business Management, Carson College of Business, Washington State University, Pullman, WA, 99164, USA.

Abstract

Given that the United Nations views environmental, social, and governance (ESG) as a practical framework for anchoring responsible corporate behavior to achieve its sustainable development goals, this study constructs an autoregressive jump intensity trend (ARJI-trend) model to determine if ESG can improve future resilience and create crisis-resilient value for chained-brand hotel corporations from the effects of COVID-19. The findings indicate that the ARJI-trend model indeed captures both the permanent and transitory components of the hotel corporation's ESG performance related to stock return dynamics. When ESG rating is taken into account, the following conclusions emerge: 1) the transitory component of time-varying return variance decreases but the permanent component does not; 2) the hotel corporation portfolios with a lower transitory component experiences a higher return, implying that the hotel corporations with a higher ESG rating appear to be more defensiveness; and 3) with proper asset reallocation, a portfolio centered on strong ESG-conscious hotel corporations is a safe-haven asset during market turmoil.

Keywords: Autoregressive jump intensity trend model; COVID-19; ESG; Environmental-social-governance; Hotel industry; Risk management.