The Impact of Publicly Owned Hotels on Competing Properties


Substantial public subsidies, and even outright public ownership, of hotels have become common in the United States as communities target tourism as an integral economic development tool. A critical question that is increasingly being raised about the public sector entering the hotel business is, are these government-funded facilities unfair competition to properties developed by the private sector? The common reply to these concerns is that the publicly owned hotel is critical to growing demand for lodging accommodation and that once it opens, the new hotel will attract enough new business that all hotels will benefit. We use an event study to test this hypothesis across all of the 100% publicly developed hotels for which there are sufficient data to conduct the analysis. In looking at these 21 hotels, we found strong evidence that the performance of neighboring hotels worsens after the introduction of a publicly owned hotel.

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