Competitive survival in a devastated industry: Evidence from hotels during COVID-19

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Abstract

In the face of COVID-19, the federal government scrambled to provide emergency funding to businesses, but did not always take into account the heterogeneous nature of firms, especially within industries. Using the lodging industry as the application, this article shows that businesses' failure risk in a pandemic depends on a business' native ability to adapt to changing safety needs, in particular its ability to provide a socially distanced environment. Hotels not well suited to social distancing—for example, destination-type hotels with large gathering spaces and many personalized services—offered deeper price discounts or closed down altogether during the pandemic. Simpler hotels with fewer ancillary services were more likely to remain open, with a substantial proportion actually increasing prices. Area infection rates mattered little. Effects are identified by comparing prepandemic expectations of outcomes to updated within-pandemic expectations of outcomes, all while holding the place and the time of consumption fixed.

Original languageEnglish
JournalJournal of Economics and Management Strategy
DOIs
StateAccepted/In press - 2021

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