Researchers study performance of India’s hospitality sector in post-COVID times

Not just health and lifestyle, the COVID-19 pandemic left a huge impact on industries and thereby the economy. Among the worst hit was the hospitality sector, worsened by nationwide lockdowns and curfews. In the wake of the industry striving to bounce back, researchers got together to study “firm-specific characteristics” that affect the profitability of the hospitality sector in India.

In a paper titled: “Firm-Specific Determinants of Firm Performance in the Hospitality Sector in India”, the researchers used a sample of 440 public and private hospitality firms for 11 years to test “the relationship between firm characteristics and performance” after controlling “unobserved heterogeneity using firm fixed effects”.

The paper has been authored by Dr Akshita Arora, assistant professor, department of Finance, Apeejay School of Management (ASM), Delhi, along with Tarun Kumar Soni, Finance and Accounting Area, FORE School of Management, Delhi, and Thi Le from Thuongmai University, Vietnam and Murdoch Business School, Murdoch University, Australia.It was published by MDPI in a special issue: “SMEs, Entrepreneurial Firms and Sustainability: Theory and Practice”.

Dr Arora said, “Tourism is one of the sectors which was hit the most because of the pandemic and the last one to recover. This sector contributes substantially to the GDP of the country, which motivated me to pursue research on this topic. In this paper, we have tried to examine the firm-specific factors which affect the performance of tourism companies.”

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“The estimation results demonstrate that the net asset turnover, liquidity, foreign earnings intensity, and age have significant, positive impacts on profitability. In contrast, solvency and size have negatively impacted firm performance. Further, we found differences in the magnitudes of coefficients for private and publicly listed companies. The findings provide important implications for managers and regulators to stimulate new solutions to overcome the ongoing difficult period,” the study mentions.

The hospitality sector is among the major contributors to the GDP of any economy. Talking about the relevance of the study and how it adds to the existing literature, the authors mention, “Most of the existing studies have either been based on small samples, limited time frames, or primary questionnaires covering firms in specific regions of India. This study is among the few to extensively cover private and publicly listed firms for 11 years, covering two political regimes and firms across the country. Second, it also examines the impact of different political regimes, as the 11 years have witnessed several significant changes related to the tourism sector made effective in the new regime.”