The Impact of the Great Recession of 2009 to 12 on the US Tourism Industry and Firm Performance

Abstract

This paper empirically examines the effect of the Great Recession of 2009 to 12 on the US tourism industry and firm performance. The daily equity index and firm performance data are collected from the 30 selected US tourism firms during the period of 2005 to 12. Applying the joint test of contagion, proposed by Fry-McKibbin, Hsiao and Martin (2017), to test for contagion in the US tourism firms, the results show that the Great Recession of 2009 to 12 has a direct and significant impact on the US tourism industry and tourism firm performance. Specifically, concurrently with the major events (e.g., the European debt crisis), that occurred during the crisis, more than 85% of the US tourism firms on average are affected by this crisis. At the firm performance, the results show that the crisis severity index negatively correlates with liquidity, profitability, growth, turnover ratios, but positively correlates with leverage ratios. Furthermore, the results indicate that the liquidity, profitability and growth ratios play a more important role than turnover and leverage ratios in explaining the crisis transmission during the Great Recession of 2009 to 12. The findings offer practical value to help tourism firms monitor and control their performance measures to prepare for future economic downturns.