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Hotel Industry Stocks Appear to React More Sensitively to Interest Rate Changes
by the Federal Reserve According to New Study, 'Saving the Bed from the Fed'
by Cornell Center for Hospitality Research

Also Available, a Brief on Chain Growth, 'Age, Size, and Survival and Growth of Franchise Chains'

Ithaca, NY, July, 2012 - A new report published by the Cornell Center for Hospitality Research (CHR) at the School of Hotel Administration takes on the issue of the supposed risk in investing in hotel stocks. In addition, a recently posted research brief highlights the potential dangers of rapid growth among youthful franchising firms.

Cornell Study Highlights Hotel Industry Stock Reactions to Interest Rate Changes

Hotel industry stocks are far more sensitive than the rest of the equity market to changes in interest rates, according to a new study from the Cornell Center for Hospitality Research (CHR). When the U.S. Federal Reserve unexpectedly changes the federal funds rate, the entire stock market reacts, but changes in hotel stock prices are much more dramatic than the market as a whole. The study, "Saving the Bed from the Fed," by Levon Goukasian and Qingzhong Ma, is available at no charge from the CHR. Goukasian is the John and Francis Duggan Professor of Business at Pepperdine University, and Ma is an assistant professor of finance in the Cornell School of Hotel Administration.

"Hotel stocks are sometimes viewed as risky," observed Ma. "Our study shows that it's true that hotel stocks react strongly to unexpected changes in the fed funds rate. However, investors may find hotels to be a valuable part of their portfolio, particularly if they apply appropriate risk management strategies." Goukasian and Ma also found that restaurant stocks do not react as strongly to unexpected changes in the fed funds rate.

Cornell Research Brief Addresses Chain Growth and Survival in Retail and Service Industries

The commonly held idea that large franchise chains are more likely to survive than smaller chains is not always the case, according to a Research Brief from the Cornell Center for Hospitality Research (CHR). The Research Brief, entitled "Age, Size, and Survival and Growth of Franchise Chains," explains that large firms that are relatively young and perhaps have grown too fast are more likely to fail than older large chains.

In addition to its series of full research reports, CHR also summarizes hospitality studies of interest that are published in academic journals. This Research Brief is based on a full study, "Survival and Growth in Retail and Service Industries: Evidence from Franchised Chains," by Renáta Kosová and Francine Lafontaine, which appears in the Journal of Industrial Economics.

For their study, Kosová and Lafontaine analyzed the growth and survival of 5,044 franchise chains across different service industries. They found that chains seem to have a size limit, which the researchers interpret as demonstrating consumers' desire for diversity. Thus, the world's largest restaurant chains, for example, have been able to continue growing through product diversity, rather than just by adding more outlets.

About The Center for Hospitality Research

A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center's 78 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. The center also publishes the award-winning hospitality journal, the Cornell Hospitality Quarterly. To learn more about the center and its projects, visit


Jane Henion

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