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Hospitality Leadership Through Learning
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The Influence of Gasoline-price Flunctuations on U.S. Lodging Demand

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By:  Cathy A. Enz Ph.D., Kate Walsh Ph.D., and Linda Canina Ph.D.

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Executive Summary: A 13-year analysis of the relationship between gasoline prices and lodging demand found that a 1-percent increase in gasoline prices results in a drop of rooms demand of 1.74 percent. The study, which is based on brand-name hotels in the United States, was done at The Center for Hospitality Research.

The researchers examined monthly room-night data from 1988 through 2000 from the Smith Travel Research database. The researchers also factored gross domestic product into their analysis and included a trend factor as an additional control. All room rates were adjusted to year-2000 dollars using the consumerprice index (CPI).

Examining the effects of gasolineprice increases on various lodging segments, the researchers determined that the effects of rising gasoline prices fall most heavily on midscale and economy hotels, with a lesser effect on upscale properties. For example, a 1-percent increase in gas prices would reduce annual economy-hotel demand by 2.89 percent. Midscale properties with F&B would see a demand reduction of 4.12 percent and limited-service midscale properties would have a reduction of 2.89 percent with every 1-percent increase in gasoline prices.

The combined effects of hotel location and market segment clarify the effect of gasoline-price increases on hotels operating in various segments in different locations. The effects of gasoline- price changes are magnified in hotels located along highways-that is, those that depend chiefly on automobile access.

The most gasoline-price-sensitive group comprises midscale and economy hotels located in highway and suburban locations. The following demonstrates that effect. A 1-percent increase in gasoline prices reduces demand for full-service midscale urban hotels by a little over 2 percent, but for highway properties in the same segment, the loss is nearly 4 percent.

Ironically, gasoline-price increases are associated with an increase in demand for resorts in mid- to upscale segments, but resorts in the economy segment see a reduction in demand.

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About Cathy A. Enz Ph.D.

Cathy A. Enz is the Lewis G. Schaeneman Jr. Professor of Innovation and Dynamic 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 three 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 Administration 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. Three additional courses in hospitality strategic management will be available through e-Cornell in 2008. Dr. Enz also presents numerous executive programs around the world, consults extensively in North America, and serves on the Board of Directors of two privately owned hotel companies. Prior to her academic activities, Dr. Enz held several industry positions including strategy development analyst in the office of corporate research for a large insurance organization, and operations manager responsible for Midwestern United States customer service and logistics in the dietary food service division of a large U.S. health care corporation. Dr. Enz received her Ph.D. from the Fisher College of Business at Ohio State University, and taught on the faculty of the Kelley School of Business at Indiana University prior to arriving at Cornell in 1990.

For more information visit http://www.hotelschool.cornell.edu/research/facultybios/faculty.html?id=27

About Kate Walsh Ph.D.

Kate Walsh is an Associate Professor of Management at the School of Hotel Administration. She received her Ph.D. from the Carroll School of Management at Boston College and her M.P.S. degree from Cornell University’s School of Hotel Administration. She holds a Bachelor of Science degree in Accounting from Fairfield University. Dr. Walsh’s primary research is in the area of services management. She also conducts research examining the role of strategic human resource initiatives on organizational performance. In addition to contributing to numerous books, her articles are appearing or have appeared in such outlets as Journal of Management, Journal of Service Research, Journal of Vocational Behavior, Human Resource Management Review, Organization Science, Trends in Organizational Behavior, Research in Management Consulting, Journal of Applied Behavioral Science, The Learning Organization, International Journal of Hospitality Management and the Cornell Hospitality Quarterly. Dr. Walsh’s pervious work experience includes the Director of Training and Development for Nikko Hotels International, Corporate Training Manager for the former Bristol Hotels and Senior Auditor for Loews Corp. Dr. Walsh is also a Certified Public Accountant.

For more information visit http://www.hotelschool.cornell.edu/research/facultybios/faculty.html?id=95

About Linda Canina Ph.D.

Linda Canina is an associate professor in the School of Hotel Administration's Finance, Accounting, and Real Estate department. There, she teaches undergraduate and graduate courses in corporate finance. Canina also serves as editor of the Cornell Hospitality Quarterly. Her research interests include asset valuation, corporate finance and strategic management. She has expertise in the areas of econometrics, valuation, IPO's, payout policy, mergers and acquisitions, options and the hospitality industry. Canina's current research focuses on strategic decisions and performance, the relationship between purchased resources, human capital and their contributions to performance, the relationship between various liquidity measures and profitability, and measuring the adverse selection component of the bid/ask spread. Her recent publications include: "Agglomeration Effects and Strategic Orientations: Evidence from the U.S. Lodging Industry" in the Academy of Management Journal. Canina's other work has appeared in the Journal of Finance, Review of Financial Studies, Financial Management Journal, the Journal of Hospitality and Tourism Research, and the Cornell Hotel and Restaurant Administration Quarterly. She holds a Ph.D. degree from New York University.

For more information visit http://www.hotelschool.cornell.edu/research/facultybios/faculty.html?id=10