Cornell Study Highlights Hotel Industry Stock Reactions to Interest Rate Changes
July 23, 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.
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.
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 www.chr.cornell.edu.
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