The influence of firm characteristics on profitability

Purpose The purpose of this study is to inspect factors influencing profitability in the Italian hospitality industry during the period 2008-2016. Design/methodology/approach This paper examines the profitability and its determinants using a sample of 2,366 Italian hotels. The author applies a multidimensional measure of profitability comprising return on equity, return on assets, occupancy rate and gross operating profit per available room. The author investigates variables influencing performance and includes them into five groups: market variables, business model, ownership structure, management education and control variables. Findings The results show that financial crisis, business model and ownership structure affect hotel firms’ profitability. Particularly, findings suggest that size, internationalization, location, accommodation as first activity and chain affiliation influence profitability positively. Research limitations/implications Results confirm the importance of firm-specific factors for evaluating the profitability of a hotel firm. Findings also provide new evidence for academics to assess factors that would guarantee profitability of hotels in developed countries such as Italy. Practical implications This investigation offers valued information and strategic suggestions for hotel investors, hotel owners, hotel managers, tourism playmakers and government. Originality/value This paper offers an in-depth examination of the practices and characteristics of profitable hotels in Italy. Few empirical studies examined the determinants of performance in the European and Italian hospitality field so far. Hence, this study attempts to bridge the gap in prior literature on profitability of the Italian hospitality industry.