The Professional Refereed Journal of the Association of Hospitality Financial Management Educators Volume 13 | Issue 1 Article 26
Ratio Analysis for the Hospitality Industry: A cross Sector Comparison of Financial Trends in the Lodging, Restaurant, Airline and Amusement Sectors Woo Gon Kim Baker Ayoun
Kim, Woo Gon and Ayoun, Baker (2005) "Ratio Analysis for the Hospitality Industry: A cross Sector Comparison of Financial Trends in the Lodging, Restaurant, Airline and Amusement Sectors ," Journal of Hospitality Financial Management: Vol. 13: Iss. 1, Article 26. Available at: http://scholarworks.umass.edu/jhfm/vol13/iss1/26
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Ratio Analysis for the Hospitality Industry: A cross Sector Comparison of Financial Trends in the Lodging, Restaurant, Airline and Amusement Sectors RATIO ANALYSIS FOR THE HOSPITALITY INDUSTRY: A CROSS SECTOR COMPARISON OF FINANCIAL TRENDS IN THE LODGING, RESTAURANT, AIRLINE AND AMUSEMENT SECTORS Woo Gon Kim and Baker Ayoun ABSTRACT This study uses ratio analysis to examine salient financial trends within four major sectors of the hospitality industry for the 1997-2001 period – namely lodging, restaurants, airlines and the amusement sectors. Cross-sectional analysis results indicate that at least for the test period, eight out of thirteen financial ratios were statistically different across the four hospitality segments. As such, financial trends and cross sectional anomalies within the examined hospitality industry segments are better understood.
Evidence exists that since the late 1800’s, ratio analysis has been widely used in the study of published financial data. Indeed, ratios have been used to help evaluate companies’ financial condition since the beginning of the finance discipline (Lawder, 1989). Literature on financial statement analysis has discussed the use of ratio analysis as a fundamental tool for evaluating the financial health of a company, and many financial ratios have been developed and are used by practitioners and academicians. Moreover, accounting and finance textbooks typically emphasize the use of the ratio analysis.
However, and in spite of all the evidence that financial ratio analysis is, and has been, a widely used technique, there have been very few attempts to apply it in the hospitality industry. Indeed, a survey of the literature revealed a handful of studies addressing the issue within the hospitality industry context. Therefore, the current study attempts to investigate the technique as applied in this industry. Hospitality-related industry segments may comprise hotels, restaurants, airlines, and other amusement and recreational services. Knowing the financial characteristics of companies in each of these four segments would be helpful for those who like to understand the commonality and differences between them. Financial ratio analysis is a useful analytical tool for this purpose. It can reveal the relative financial strengths and weaknesses of these segments, and identify the potential investment opportunities for investors interested in this industry. The objective of the study is to provide information to a variety of entities that might be interested in comparing major financial characteristics of companies on its different segments. The study is divided into several parts. The next section is devoted to shed the light on the nature and uses of ratio analysis, as well as its application in the hospitality industry. Research Methodology is then presented along with data analysis and discussion. Finally, brief summary and future research...