Segment diversification is a common strategy applied by hotel companies. According to previous research on the modern portfolio theory, a company can reduce risks and thus increase its value with more diversified operations. Such reasoning can certainly apply to the hotel industry in terms of its segment strategy. However, the findings are inconclusive. In particular, other literature argues for more concentrated rather than diversified operations. This study therefore examines the impacts of segment diversification on companies' risk-adjusted performances among publicly traded US hotels. The results suggest that a moderate segment diversification strategy maximizes a company's risk-adjusted performance.
All Science Journal Classification (ASJC) codes
- Geography, Planning and Development
- Tourism, Leisure and Hospitality Management