The Impact of External Shocks - 9/11 and the Financial Crisis.
By Renáta Kosová Ph.D. and Cathy A. Enz Ph.D.
Sunday, 4th November 2012
The US hotel industry faced two major external shocks in the decade of the 2000s, the terrorist attacks of September 11, 2001, and the financial crisis of September 2008, which led to an economic recession.

Using data from STR covering nearly 35,000 hotels, this study isolates the specific effects of the two shocks by controlling for other market factors (e.g., inflation, seasonality) and hotel characteristics (e.g., hotel size, segment, or operation type) that affect a hotel's daily operations.

The study shows that hotels were significantly affected by both events, but they started to recover relatively quickly, within four months of each shock.

Because of the nature of the shock, the 9/11 terrorist attacks had an abrupt and dramatic impact in reducing hotels' occupancy, and rates briefly followed occupancy downward.

The effects of the financial crisis took longer to develop but were less striking and apparently well handled by most hotel managers.

Looking specifically at New York City's hotels which stand next to ground zero for both shocks, the study found a pattern of occupancy, ADR, and RevPAR similar to that of the nation as a whole. New York's luxury hotels felt the brunt of the shocks, but they were able to recover.

Overall, the study paints a picture of an industry that maintains its ability to address the effects of environmental shocks, and focuses well on revenue management. Far from being in disarray, hotel management addressed the effects of these two shocks, as evidenced by the hotels' recovery.

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About the authors:
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Renáta Kosová is an assistant professor at the School of Hotel Administration. She teaches strategy and international business courses. Prior to her arrival in 2007, she was on faculty at The George Washington University Business School. Kosová's primary research focuses on the impact of globalization on firm behavior and competitiveness.

Specific areas of interest include the impact of foreign direct investment and international trade on domestic firms in transitional economies.

Additional research involves issues more central to the field of industrial organization, including firm/industry dynamics; determinants of firm performance and organization economics, with specific attention to franchising and service industries.

Cathy A. Enz is the Lewis G. Schaeneman Jr. Professor of Innovation and 4Hoteliers Image LibraryDynamic Management and a full professor in strategy. She recently served as Associate Dean for Industry Research and Affairs, and served as the Executive Director of the School's Center for Hospitality Research from 2000-2003. Dr. Enz has published over eighty journal articles, book chapters, and four books in the area of strategic management.

Her research has been published in a wide variety of prestigious academic and hospitality journals such as The Administrative Science Quarterly, The Academy of Management Journal, The Journal of Service Research, and The Cornell Hospitality Quarterly. Dr. Enz teaches courses in innovation and strategic management.

In addition, she developed The Hospitality Change Simulation, a learning tool for the introduction of effective change, which is available as an online education program of e-Cornell.
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