Tourism seasonality and hotel firms’ financial performance: evidence from Norway

Abstract

ABSTRACT This study explores the impact of seasonality on hotel firms’ financial performance and whether this impact depends on tourism destinations and the variations of the tourism demand distinguished by domestic market and international market. Financial performance is measured by the most commonly-applied indicator, Return on Assets (ROA), which is further decomposed to profit margin and asset turnover. The present study contributes to the literature by evaluating the importance of pricing strategies and marketing efforts in alleviating the negative effect of seasonal demand. Dynamic panel models at both the national and regional levels are applied to a sample, including the accounting data of all Norwegian hotel firms between 2008 and 2017. Our empirical findings suggest that the impact of seasonality on financial performance depends on market segments and varies across tourism destinations. Additionally, seasonality has a stronger impact on profit margin than on asset turnover, indicating that marketing strategies and pricing and revenue management techniques can effectively alleviate the negative impact of seasonality.