If this relationship holds true, then lagged values of x should contain information that helps predict y. In addition, the public should be informed precisely how the government plans to finance this spending (imposing taxes, increasing deficits and debt ceilings, etc.). They found that closure policies were associated with a 20% - 30% reduction in non-salaried workers in the hospitality industry. [46] and the squared returns of the hospitality sector. The Positives and Negatives of COVID-19's Impact on Healthcare These findings raise the possibility that the market was overwhelmed by negative sentiment. The first is the ambiguity about the governments future fiscal steps that increased the uncertainty in the stock market [23]. They estimated negative mean cumulative abnormal returns of 17.54% for 54 publicly traded hospitality firms from 23 different countries. As the reported results in Table 3 illustrate, the combined effect of these interventions had a particularly strong impact on the hospitality industrys performance (CAR = 21.98%), indicating the severe effects of the stay at home and public transportation restrictions which also spilled over to the entertainment (CAR = 16.29%) and apparel (CAR = 11.94%) industries. [26] explored the relationship between government policy responses to the COVID-19 pandemic and stock market volatility. (1) Epub 2021 Nov 22. They should also follow them with economic support to reduce not just the negative effect of the closures, but also the negative effect of the uncertainty about when the restrictions will be lifted. The industry, which includes hotels, restaurants, bars, and other tourism-related businesses, has been hit hard by lockdowns, travel restrictions, and changes in consumer behavior. (B) The solid bold red line is Baker et al.s daily index of uncertainty due to infectious diseases [46]. Parents also received $500 for each qualifying child. [1] tracking the U.S. governments interventions to the COVID-19 spread, we explore the response of U.S. hospitality stocks to different types of government interventions. We also identified March 19, 2020 as another significant date because it marked the day when President Trump signed a $100 billion economic aid package. A challenging time such as the COVID-19 pandemic has provided an opportunity to learn more about human behaviours and mental health (Almeida et al., Citation 2020; Ha, Citation 2020; Khoo & Lantos, Citation 2020; Rousseau & Miconi, Citation 2020).COVID-19 has adversely impacted many parts of human life, become one of the major global threats, and negated mental health (Cullen . Intermediation. In fact, there is no golden number for the length of the event window. 8600 Rockville Pike This outbreak is an opportunity for governments and businesses to develop new concepts of hospitality by reducing costs, utilizing green and clean energy and implementing new health protocols for safe travel. It was the most substantial stimulus package in U.S. history, and included payments of up to $1,200 for individuals or $2,400 for married couples. This result is both interesting and important given that according to the American Hotel and Lodging Association, job losses in the industry are expected to be extensive. They reported that these firms suffered from steep declines in their earnings and stock prices during the SARS outbreak. We use market prices as a proxy for the overall state of the hospitality industry as well as for the other related sectors. and transmitted securely. Closures had a consistently negative effect on the hospitality industry. The biggest was the impact on the health and safety of employees and customers. Epub 2021 Mar 3. -, Ahmad W., Adaoglu C. Cash management in the travel and leisure sector: evidence from the United Kingdom. [12] examined stock market reactions to the COVID-19 outbreak around the world. This article focuses on the impact of COVID 19 and ongoing adaptation of the hospitality industry, with specific attention to the short- and long-term impacts of COVID-19 on its business operations and asset management strategies. [44]). In this respect, it is important to consider the long-term implications of the COVID-19 crisis. Competing interests: The authors have declared that no competing interests exist. The only intervention that had a significantly positive effect on the hospitality industry was the $100 billion COVID-19 aid package, signed by President Trump on the evening of March 18, 2020. This uncertainty originated in two different, yet related, sources. Trade wars, global politics and national policies will influence the future of supply chain structures. doi: 10.1080/1351847X.2019.1652197. David Yechiam Aharon, They documented that on February 26, 2020, when the first domestic case was confirmed in California, 15 industries reacted negatively to this news. [43]), and the willingness to travel and the spreading of fake news (Alvarez-Risco et al. Abstract As the United States prepares for a COVID-19 recovery, policymakers need to understand why some cities and communities were more vulnerable to the pandemic's economic consequences than. The empirical findings confirm that their financial-slack-driven risk preparedness should be judged as relatively low. Cresp-Cladera et al. When hospitality firms revenues drop 80%, the predictions show that 32% of firms would be in financial distress. As the table indicates, most of the events are associated with a significantly negative response to U.S. government interventions. About 74% of the hotels in China were closed in January and February 2020 for an average period of 27 days. During this time, owners and businesses operators in the hospitality industry can prepare for future activity and the post COVID-19 tourism environment. The aim of this stimulus was to cover the salaries or provide direct cash payments to people who had lost their jobs or could not work (e1). Additional results for different time windows. Gerding et al. #2 Positive Feedback is Steadily High. The https:// ensures that you are connecting to the Businesses, large or small, face the dilemma to continue to pay employees in the event of reduced demand. The subsections provide a detailed explanation of how we measured the returns, expected returns and abnormal returns as well as additional information concerning government interventions. In addition to the results reported above, additional findings for different time windows are available in the S1 Appendix. 10 Inspirational Hospitality Industry Stories During COVID-19 The economic and social impact of COVID-19 on tourism and hospitality industry: A case study from Oman. More recently, Huang et al. The impact of COVID-19 on the hospitality industry 5 min read | 21 September, 2020 By George Nash It's no secret that the hospitality industry has been one of the hardest hit by the COVID-19 pandemic. Note that the aid package (e3) was a turning point in the behavior of the hospitality industry performance. The resulting counts were scaled by the count of all articles on the same day. To obtain heteroscedasticity and autocorrelation consistent covariance matrix estimates, we employed Newey and Wests [55, 56] estimation method. These numbers indicate that most of the hotel industry has a long road to recovery, especially when considering that an occupancy rate of 35% or lower makes it impossible for many hotels to stay open. In addition to this report, they also surveyed hotels in Singapore to estimate the economic loss resulting from SARS. From this point forward, the U.S. engaged in more frequent and severe interventions. Holdings of financial slack in the analyzed sample of hospitality businesses. We estimated the coefficients parameters in Eq (1) using a pre-event estimation period (December 31, 2018-December 30, 2019) consisting of 252 trading days before the outbreak of COVID-19, as on December 31, 2019, the WHO was informed of cases of pneumonia of an unknown cause in Wuhan City, China. To deal with the uncertainty related to the spread of the virus itself, governments must continuously provide as much information as possible about the evolution of the pandemic. However, as a sector that relies on peoples disposable income, the hospitality industry is particularly sensitive to economic upheaval. Bethesda, MD 20894, Web Policies Similarly, the general state of the travel and tourism industry is also under a great threat. In a subsequent study, Zaremba et al. Department of Economics and Accounting, Ruppin Academic Center, Emek Hefer, Israel, Affiliation: TrustYou DACH Hospitality Statistics Q1 2023. [14] explored the cumulative abnormal returns during the COVID-19 epidemic for two groups of stock markets: countries that had experience with SARS, and countries that did not. As evident in its cumulative negative returns, the hospitality industry regarded the announcements about debt/contract relief (e2) as insufficient, especially, due to the opinion that the hospitality sector would be the first to be hurt and the last to recover. 24, 2020 When the COVID-19 outbreak caused local businesses to pivot and find new ways to stay afloat during the economic downturn, Dr. Alison "Ali" Green, UWF Department of Global Hospitality & Tourism Management chair and associate professor, wanted to do her part. During this month negative returns abounded. The uncertainty index observations correspond with the trading days on the stock exchange. sharing sensitive information, make sure youre on a federal Granger causality test results (December 31, 2018-April, 30, 2020). The contingencies between slack holdings and slack persistence. The economic and social impact of COVID-19 on tourism and hospitality To estimate abnormal returns, we followed several studies that use the event study methodology in the hospitality and other related industries (e.g., [3, 17, 51, 52]). In equilibrium, these types of uncertainty lead to increased volatility when the government changes its policy. Ding et al. Persistence of financial slack holdings in the analyzed sample of hospitality businesses. Int J Hosp Manag. Bookshelf According to the World Health Organization (WHO), the COVID-19 pandemic was first reported in Wuhan, China on December 31, 2019. Overall, their results point to the herding phenomenon in international capital markets, but policy responses reduced such behavior. Section 2 presents the scientific background. https://www.ustravel.org/research/travel-facts-and-figures, https://www.ahla.com/sites/default/files/recessiondepression_0.pdf, https://hoteltechreport.com/news/tourism-industry-statistics#hotels, http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html, http://policyuncertainty.com/infectious_EMV.html, https://www.ahla.com/sites/default/files/2021_state_of_the_industry_0.pdf, https://www.bsg.ox.ac.uk/sites/default/files/2020-04/BSG-WP-2020-031-v4.0_0.pdf, https://wttc.org/Research/Economic-Impact, Corrections, Expressions of Concern, and Retractions. The maximum value reached was 112.93, recorded on March 15, 2020. 2022;204:844-853. doi: 10.1016/j.procs.2022.08.102. They classified these articles into three categories: E: economic, economy, financial; M: stock market, equity, equities, Standard and Poors; and V: volatility, volatile, uncertain, uncertainty, risk, and risky. In addition, about half of hotel markets, representing 72% of hotel rooms in the US, are still in a recession or depression. Within a few weeks of the crisis, the thought of going for dinner on a Friday night became a foreign concept. eCollection 2022. Using a structural vector auto regression (SVAR) framework, they examined the link between the COVID-19 outbreak, macroeconomic fluctuations and hospitality stock returns in China. 2022 Jun;30:100360. doi: 10.1016/j.jhlste.2021.100360. According to the U.S. travel association (https://www.ustravel.org/research/travel-facts-and-figures), in 2019, travel alone generated $2.6 trillion in total economic output, supported 15.8 million American jobs, and accounted for 2.9% of the U.S. gross domestic product (GDP). Indeed, at this point, there is still great uncertainty about the rapidity of the spread of the disease and its lethality, whether a second wave of infection will occur, the time required to develop and distribute vaccines to the public, the real effectiveness and outcomes of social distancing and whether government policy responses and interventions will become permanent. 2021 Nov 9:e2786. Furthermore, the sudden, widespread outbreak of COVID-19 caught everyone by surprise. During this period of time, even the economic intervention of debt/contract relief (e2), which postponed debt payments, had a negative effect (CAR = 5.36%) on the hospitality industry and also for the food (3.396%) and entertainment (2.149%) industries. COVID-19 impact: local hospitality and tourism industry In parallel, Fig 1 plots a comparison of the cumulative returns of the market portfolio (S&P 500), the hospitality equity portfolio, and other related industries relative to various event dates associated with COVID-19s outbreak. Even though the consequences of COVID-19 have been multiply analysed by many UAE researchers, its global and local impact on the MICE industry, as well as the strategies for MICE companies . Next, we defined the length of the event window in which we examined the behavior of the equity prices of stocks in the hospitality sector and those in related industries. The contingencies between slack holdings. Owners and hospitality service-related vendors such as airline companies, cruise companies and multinational hotel chains must cooperate with each other, and enforce strict protocols for the handling and preparing of food. Governments groped in the dark in an effort to find ways of dealing with the situation. These statistics highlight the economic importance of travel and tourism to the U.S. economy as well as to the global economy as a whole. Chen et al. Intuitively, such a measure should be interpreted as good news. The second step of our methodology attempts to link uncertainty as a potential driver of the variations in the returns of the hospitality stocks. This study explored the effects of interventions by the U.S. government on the market value and stock returns of the hospitality sector and industries closely related to it. Pennathur et al. Present and prospective research themes for tourism and hospitality education post-COVID19: A bibliometric analysis. They confirm that the most significant factor during pandemics, particularly for the hospitality industry, is uncertainty. 2021 Nov;155:102493. doi: 10.1016/j.tre.2021.102493. The literature suggests several possible additional factors behind the poor performance of the hospitality industry that might delay its future recovery. Finally, there was a 16% drop in profit margins from April through June in 2003 compared to the same period in 2002. official website and that any information you provide is encrypted Kim et al. 1. Menon D, Gunasekar S, Dixit SK, Das P, Mandal S. J Hosp Leis Sport Tour Educ. They argue that the increasing uncertainty about the COVID-19 outbreak has made the Chinese stock market more turbulent and less predictable. An important recommendation derived from our results is providing financial assistance alongside regulations that close workplaces. As can be seen, the overall negative performance is not limited to the hospitality industry. PLoS ONE 16(8): COVID-19; Financial slack; Hospitality industry; Pandemic; Risk preparedness. In this spirit, prior works have documented that media-driven pessimismfueled by the outbreak of a pandemichas a remarkable impact on stocks exposed to intense media coverage (e.g., [57]). doi: 10.1002/pa.2786. This model allows us to test whether lagged values of one variable, say X, helps explain current values of another one, say Y. [40] tested the effect of SARS on the Korean hotel industry. This study has given valuable suggestion to mitigate the negative economic and social impact on the tourism and hospitality industry of Oman. Mohammed Said Al-Mughairi H, Bhaskar P, Khalfan Hamood Alazri A. J Public Aff. Corporate demand for liquidity. Disclaimer. Matrix of the evaluation of the degree of risk preparedness (D_RP) specification. DOI: 10.1016/j.ijhm.2020.102799 The hospitality industry is regarded as one of the most affected by the consequences of COVID-19 pandemic, and the undefined persistence of the pandemic duration raises anxiety about the ability to recover from this dramatic situation. Post Pandemic Asset Management in Hospitality | BHR | Boston However, the overall response of the hospitality industry to the U.S. governments testing policy intervention (h2) was negative (CAR = 4.195%). According to a report published by the American Hotel and Lodging Association (https://www.ahla.com/sites/default/files/recessiondepression_0.pdf), the expected US hotels losses are nearly $83.7 ($51.2) billion in room revenue in 2020 (2021), compared with 2019, while job losses in 2020 (2021) are projected to be nearly 630,000 (546,000). In spite of these generous fiscal steps, the results in Table 3 show a decline in the hospitality performance on the event date. Finally, we aggregated the abnormal returns (CAR) and computed the t-statistics, following Brown and Warner [49]. In fact, the period from February 21 to March 18 is characterized by a sharp decline in the hospitality industrys performance as well as on other related industries. COVID-19's effect on the hotel industry | McKinsey Employees' turnover intentions and work-family conflict as a result of the hospitality work environment are considered the major global challenges confronted by hospitality organizations, especially in the era of COVID-19. In this spirit, empirical studies have shown that increased ambiguity about government policy and spending has direct implications for the steady state of many macroeconomic variables such as debt, the GDP and consumption (e.g., [25]). During the COVID-19 crisis, governments have taken different measures in the health, public and economic fields. The error term is the industry-specific component or the unexpected return, which can be attributed to the new information released such as the intervention. One Year After Pandemic Hit, The Hospitality Industry Is - Forbes 8. Furthermore, from January 14 to 28, the occupancy of the hotels dropped from around 70% to 8% and remained under 10% in the following 28 days. 2022 Feb 18;17(2):e0264016. Tew et al. The Hospitality Industry in the Face of the COVID-19 Pandemic: Current Crowdsource Innovation Get involved with our crowdsourced digital platform to deliver impact at scale Stay up to date: COVID-19 Companies should analyze supply chains now to mitigate against future disruptions. Indeed, the hospitality industry lost about 45% of its cumulative market value. The figure includes 7-day-a-week observations. Al-Awadhi et al. Table 2 presents the list of U.S. government interventions with a definition for each intervention variable. In other words, if we do not reject this hypothesis, then variable X does not Granger-cause Y. Lastly, after testing the potential relationship between hospitality stock returns and uncertainty, we explore the uncertainty levels around the interventions themselves.
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