Impact Factors on Portuguese Hotels’ Liquidity

Luís Lima Santos,Conceição Gomes,Cátia Malheiros,Ana Lucas

doi:10.3390/jrfm14040144

Luís Lima Santos, Conceição Gomes + Show 2 more

Open Access

https://doi.org/10.3390/jrfm14040144

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Abstract

As a core activity in the tourism sector, hospitality accounts for the largest share of the sector’s revenue. The last few years, prior to the COVID-19 pandemic, have been years of strong growth both in the number of hotel companies and in the number of available rooms. The hospitality industry has also been betting on diversification as well as on the quality of its services. This activity has a strong impact on the various agents in the sector, thus it makes it essential to measure and analyze the sustainability of these hotels. One of the indicators that proficiently measure short-term sustainability is the company’s liquidity level, as it demonstrates its ability to meet short-term financial obligations. This type of indicator is useful since it provides relevant information not only for managers, but also for banks and lenders, and investors. Volatility is a characteristic of hotels which are associated with geographic location, implying changes in the main operating revenue indicators. In this sense, this research aimed to investigate if the ability to reimburse short-term responsibilities differs according to the geographic location, food and beverage service existence, official stars classification, and hotel size. Portuguese hotels with and without restaurants were analyzed in the 2013–2017 period and the number of available rooms and star rating were included in the database. All the information was obtained on SABI (a database of detailed financial information of Portuguese and Spanish companies) and RNET (the Portuguese Register of Tourist Enterprises). Findings show that the behavior of some hotels concerning short-term obligations does not differ much considering the location of the hotels. However, the Algarve and the North region have the highest values. In fact, the official star rating proved to have the greatest influence. The size of the hotels, as well as the existence of restaurants negatively influences liquidity. This information is very important for hotel investors. This study can also provide management information that allows more informed decision-making as well as the definition of corrective measures if necessary.

Highlights

Previous literature highlights ratio analysis like liquidity, solvency, and profitability based on the company’s accounting statements as important tools to analyze a company’s financial position and to allow better decision-making to the managers
The liquidity analysis allows assessing the ability to deal with economic crises, which is an important aspect to consider in management
Despite the importance of the indicators analyzed in the previous literature, this paper studies liquidity, as its goal is to better understand if Portuguese hotel companies can settle current liabilities with their cash, bank accounts, and receivable accounts or even with their current assets if considered inventories

Summary

Introduction

Previous literature highlights ratio analysis like liquidity, solvency, and profitability based on the company’s accounting statements as important tools to analyze a company’s financial position and to allow better decision-making to the managers. Having a good liquidity level is very important for day-to-day management. Liquidity analysis is an extremely powerful tool in the management of companies, as it allows the detection and projection of short-term imbalance situations during the companies’ activity. The liquidity analysis allows assessing the ability to deal with economic crises, which is an important aspect to consider in management. As in the hospitality industry, managers the accounts to reveal a balance where liquidity is an essential part of it, in other words, the capacity to meet its commitments to creditors in the short term

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