The importance of ownership form and spatial location in the lodging industry: An empirical analysis of the hotel sector in Texas

Ownership form has strong implications for firm performance and the nature of competition in a market. Whereas there are differences across ownership forms on high levels of aggregation, the most obvious effects of ownership become visible when samples of establishments are observed at a more disaggregated establishment level. This is particularly important in industrial organization research as firms face their competition at the component level, regardless of internal structure. Chain units are often misleadingly thought of as unitary actors in the market. This dissertation demonstrates several aspects of service market behavior using a set of econometric techniques that consider its geographical nature. It demonstrates that spatial econometric techniques should be considered for analysis as spatial autocorrelation is likely to affect this sector. Firm characteristics, including ownership form are shown to have strong effects on the immediate neighborhood and the market as a whole. It is therefore imperative that the researcher considers the implications of actors of heterogeneous ownership when analyzing market conduct and performance. In these three essays we analyze entrants’ choice of capacity and how it is affected by their interactions with the existing market, the strategic pricing amongst firms with different ownership forms and geographical locations, and differences in survival. Among our notable results, we find that firm births of chain units occur almost exclusively in cities. Franchise and independent units, as compared to company-owned hotels, exhibit clustering behavior. There is a distinct difference in price competition based ownership form composition in urban areas as opposed to suburban or rural areas; the ownership type of a hotel unit affects the pricing conduct of its competitors. Furthermore, in spite of larger entrant cohorts in cities, the probability of exit appears to be equally likely for independent units regardless of the type of geographical region. To the best of our knowledge, this is the first attempt of a spatial analysis which simultaneously considers three ownership forms. Previous work, such as Kalnins and Chung (2004) and Vroom and Gimeno (2007), consider at most two of these forms simultaneously. Because we consider these three forms together, this analysis has both empirical and theoretical relevance