Cyclical effects of advertising on hotel sales, risk and return

This study examines the effects of advertising expenditure on Taiwanese hotel sales (and profitability), risk and returns. It further tests whether the effects of advertising expenditure on hotel sales (and profitability) risk and returns rely on the business cycle condition. Panel regression test results reveal that the ratio of advertising expenditure to total asset (AD) is significant in increasing hotel sales revenue in terms of occupancy rate (Occupancy) and revenue per available room, but is not significant in increasing hotel profitability in terms of return on assets and return on equity. The relationship between AD and Occupancy is found to be curvilinear (an inverted U-shape). Although AD has a negative impact on the risk of hotel stock returns, the effect is not statistically significant. Moreover, AD is found to have no significant impact on hotel stock returns. Finally, the effects of AD on hotel stock returns and risk of hotel stock returns vary significantly in different business cycle conditions.