Does advertising spending improve sales performance?

Hotel managers and investors commonly analyze the impact of advertising spending on firm performance. This paper investigates such an impact using a comprehensive framework incorporating the moderating effects of hotel size and star ratings. We estimated sales performance via dynamic, stochastic frontier modelling. Using longitudinal data from a sample of Slovenian and Croatian hotels, we demonstrate that advertising spending has a positive impact on hotel sales performance, and that the relationship strengthens for larger hotels and hotels with higher star ratings. Theoretical and managerial implications along with directions for future research are also discussed.