Stock Market Reactions to US Hotel Firms' Strategic Alliances

Abstract

Despite the extensive research on strategic alliances in the mainstream management literature and the hospitality industry's long history of strategic alliances, research on strategic alliances in the hospitality industry has been lacking, especially research focusing on the relationship between strategic alliances and firm performance. Given this limited coverage, the current study empirically examines Chathoth and Olsen's (2003) conceptual framework of hospitality strategic alliances: moving from joint ventures, a traditional form of alliance, to collaborative alliances, such as the competitor-alliance, a newer form. The paper investigates strategic alliances in which US public hotel companies engaged during 2000–2008 and finds that collaborative alliances were more common in the hotel industry than joint ventures. The paper also investigates, through an event study methodology, how the stock market perceives the hotel alliances as they evolve from joint ventures to collaborative alliances. The authors find that the stock market perceives joint ventures positively. In the case of collaborative alliances, the market reacts positively after the initial announcement, though negatively prior to the announcement.