Effect of Unrelated Diversification Strategy on Organizational Performance among Star-Rated Hotels in the Kenyan Coast

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Despite its growth, potential contribution to the economy and being an integral part of tourism destinations, the performance of the hotel sector has remained susceptible to both domestic and global uncertainties. Most of the studies conducted in developed countries concentrate majorly on manufacturing firms. This creates a gap in developing countries. This study was guided by the following objective: To examine the effect of unrelated diversification strategies on organizational performance among star-rated hotels on the Kenyan coast. An embedded mixed method comprising a descriptive survey and explanatory research design was used. The study was conducted on the Kenyan coast. Stratified random sampling techniques were used to select the hotels, Purposive sampling was used to select Strategic managers and random sampling technique was adopted to select both middle and lower-level managers. Data was collected through a questionnaire and interview schedule. 383 questionnaires were distributed and 29 managers were interviewed. Descriptive statistics and simple linear regression were used to analyze data. Qualitative data was analyzed thematically. 354 questionnaires were dully filled representing a 92.7% return rate while 29 general managers interviewed represented 80.6%. The simple regression model result showed that R-squire = 0.558. This means that 55.8% of performance is explained by conglomerate and collaboration diversification strategies. The result indicated that conglomerate diversification strategies (p-value < 0.0001) and collaboration diversification strategies (p-value = 0.031) are significant predictors of the performance of star-rated hotels on the Kenyan Coast. The null hypothesis was tested and rejected. According to the findings, the study recommends that hotels wishing to increase or retain their financial position and market share and also achieve economy of scale even during business turbulence should employ an unrelated diversification strategy. This will ensure hotels' high performance and sustainability during business distress such as the COVID-19 pandemic or decline in product lifecycle