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Does the Hotel Industry Create Value for Owners? The Empirical Analysis of Residual Income: The Case of Slovenia and Croatia

Author

Listed:
  • Igor Stubelj

    (University of Primorska, Slovenia)

  • Mateja Jerman

    (University of Primorska, Slovenia)

  • Primož Dolenc

    (University of Primorska, Slovenia)

Abstract

This paper aims to analyze the residual income of the Slovenian and Croatian hotel industry for the period covering 2005–2008. The residual income not only looks at return on invested funds, but also implicitly compares it with the risk adjusted opportunity cost of such an investment. This parameter is therefore a better performance measure than simply accounting performance measures. The results of the analysis prove that residual incomes of Slovenian and Croatian hotels were far from being positive during the whole period. The obtained findings demonstrate that hotel companies in aggregate did not create value for their owners and that they did not generate enough profits to cover the appropriate cost of capital i.e. the cost of capital that takes into consideration the risk adjusted opportunity cost.

Suggested Citation

  • Igor Stubelj & Mateja Jerman & Primož Dolenc, 2011. "Does the Hotel Industry Create Value for Owners? The Empirical Analysis of Residual Income: The Case of Slovenia and Croatia," Academica Turistica - Tourism and Innovation Journal, University of Primorska Press, vol. 4(1), pages 63-72.
    • Handle: RePEc:prp:jattij:v:4:y:2011:i:1:p:63-72
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    References listed on IDEAS

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    3. Black, Fischer, 1972. "Capital Market Equilibrium with Restricted Borrowing," The Journal of Business, University of Chicago Press, vol. 45(3), pages 444-455, July.
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