From disruption to recovery: a multi-country analysis of tourism and hospitality firms’ performance post-COVID-19

ABSTRACT

This study employs a discontinuous growth model, a method that captures shifts in trends over time, to explore how the performance of tourism and hospitality firms has evolved from the pre-COVID to the post-COVID period. It uncovers two key insights. Firstly, a substantial decrease in tourism and hospitality firms’ financial and market performance was evident in 2020. For instance, their return on assets in 2020 was 348% lower than in 2019. Secondly, while there was no improvement in their financial performance in 2021, a noteworthy improvement in market performance was observed. In 2022, both financial and market performance exhibited significant recovery. Remarkably, the degree of recovery in market performance in 2021 and financial performance in 2022 mirrored their respective declines in 2020, indicating a restoration of tourism and hospitality firms’ performance to the pre-crisis level. However, this restoration was not observable among firms with low liquidity, little retained earnings, and high financial constraints, suggesting that such firms may take actions (such as cost-cutting) that can lead to a decline in their quality of services and customer experiences. Therefore, this study underscores the importance of government support to some tourism and hospitality firms even in the aftermath of the COVID-19 crisis.

KEYWORDS:

• Tourism and hospitality firms
• discontinuous growth model
• firm performance
• COVID-19

Disclosure statement

No potential conflict of interest was reported by the author.

Data availability statement

The data that support the findings of this study are available from the corresponding author upon reasonable request.

Notes

1 World Health Organization.

2 The classification of firm life-cycles into various stages, as outlined by Dickinson (2011), is detailed in the Appendix.

3 The average age of the firms is 25 years. This is calculated based on 2,454 firm-year observations, as data on firm age for the remaining 374 observations are unavailable.

4 This is calculated as [-0.0354 – (-0.0079)/-0.0079] *100 = 348%.

5 Since large and established firms rely on internal sources of financing (Pfaffermayr et al., 2013) and face with low financial constraints (Hadlock & Pierce, 2010), based on our results in Table 3, one can expect that the recovery in performance post-COVID would be more promient for larger and older tourism and hospitality firms. To test this empirically, the sample is split into two groups for each characteristics: Larger vs. Smaller firms, and Older vs Younger firms. Larger (Older) firms are those whose total asset (age) is greater than the median total asset (age) of firms in the same country and year while the remaining firms are categorized into Smaller (Younger) firms. The results suggest the post-COVID recovery in financial and market performance is evident only among the sub-sample of larger and older firms. As indicated earlier, since these results can be predicted based on the results in Table 3, they are not reported but are available upon request to the corresponding author.

Additional information

Notes on contributors

Md Reiazul Haque

Md Reiazul Haque is an Assistant Professor of Accounting at the School of Business and Quality Management, Hamdan Bin Mohammed Smart University, United Arab Emirates. He received his PhD in Accounting & Finance from Newcastle Business School, The University of Newcastle, Australia. His research interests include corporate governance, corporate finance, and performance measurement. Dr Haque's publications have appeared in international journals such as Abacus, Finance Research Letters, and The TQM Journal.