Howard Feiertag Department of Hospitality and Tourism Management

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Assessing new hotel openings through an event study
Nicolau, Juan Luis (Elsevier, 2002-02)
The main objective of this paper is to analyse the impact that the announcement of the opening of a new hotel has on the performance of its chain. For this evaluation, an event study is carried out on a hotel chain that trades on the Spanish Stock Exchange. The results that the empirical application arrives at are noteworthy as, on average, the reaction to such news releases is highly positive. Additionally, and from a first-approach perspective, several factors seem to exert an influence on the firm´s performance, the most important of these being its geographical location.
Foreign expansion strategy and performance
Mas-Ruiz, Francisco J.; Nicolau, Juan Luis; Ruiz-Moreno, Felipe (Emerald, 2002-08-01)
The aim of this study is to examine the determining factors of a firm's performance, as a direct consequence of its diversification strategy in its expansion into foreign markets, considering certain factors like the market, the product and the company itself. As a novelty, the methodology employed uses the event-study to estimate the excess of returns generated by its shares on the Stock Market, based on a sample, of 35 expansion announcements into external markets corresponding to 11 diversifying companies. A regression analysis is also carried out to examine the impact of these factors, market, product and company, on the excesses in returns observed. The empirical application, carried-out in Spain, has allowed us to detect that, on average, the impact of the news about a company's expansion on the returns on its shares is positive; its determining factors being the speciality of the product offered and the level of development in the target country.
The stock market's reaction to quality certification: Empirical evidence from Spain
Nicolau, Juan Luis; Sellers, Ricardo (Elsevier, 2002-11-01)
The objective of this paper is to analyse the stock market's reaction to a company that is granted a quality certification (ISO 9000), and particularly when such an award is publicly announced. To do so, we carried out an event study, estimating the mean "abnormal" change in the stock prices of all of the firms that obtained quality certification, based on the ISO 9000 norms, while they were trading on the Spanish stock market between 1993 and 1999. The results show that the stock market reacts positively to such certification. This implies that quality certification can be considered as a useful tool for reducing the asymmetry in the information that circulates among buyers and sellers. © 2002 Elsevier Science B.V. All rights reserved.
Heckit modelling of tourist expenditure: evidence from Spain
Nicolau, Juan Luis; Mas, Francisco J. (Emerald, 2005-01-01)
Purpose - This study intends to decompose the tourist choice process into two stages (decision to take a holiday and tourist expenditure), and to propose and test various expectations on the dimensions which explain the above decisions. Design/methodology/approach - In order to simultaneously model the two decisions, we use a system of equations based on the Heckit model. Findings - The dimensions affecting the decision to go on holiday are income, household size, education, size of the city of origin and opinion of going on holiday. The determinant factors influencing the level of expenditure are distance between origin and destination, type of accommodation, income, household size, age, marital status and length of stay. An important finding of this analysis is the differentiated effect of a given dimension on each decision. Research limitations/implications - The lack of information on some explanatory dimensions. Joint modelling. The spending decision should be modelled jointly with the decision to go on holiday due to the dependency between them. Practical implications - The promotion of destinations should be developed with special attention paid to some faraway markets of origin, due to the expected propensity for these tourists to spend longer periods at the destination. The specialisation of destinations in terms of accommodation type and length of stay. The design of holiday packages should be adapted to the needs of the tourists identified, as they represent the most profitable tourist profiles. Originality/value - The particular findings, and the research and practical implications proposed show the relevance of the topic analysed. Also, these aspects are backed by a sample of 3,781 individuals, which assures the robustness of the results.
Stochastic modeling - A three-stage tourist choice process
Nicolau, Juan Luis; Mas, Francisco J. (Pergamon-Elsevier, 2005-01-01)
This study analyzes a multistage tourist choice process which includes three basic decisions: first taking a vacation; second visiting foreign vs. domestic destinations, and third taking multi- vs. single-destination vacations. Various research hypotheses relating to the impact of a number of personal characteristics on these decisions are stated. The methodology uses multinomial logit models with random coefficients estimated by hierarchical Bayesian procedures. The empirical application is carried out in Spain and leads to the conclusion that personal characteristics relating to the chosen destination, personal restrictions, and sociodemographic and psychographic characteristics are determinants of these decisions and that the nested and nonindependent character of the three decisions reveals a multistage decisionmaking process.
Leveraging profit from the fixed-variable cost ratio: the case of new hotels in Spain
Nicolau, Juan Luis (Elsevier, 2005-02-01)
The aim of this paper is to detect the variations in the risk of a hotel chain's performance derived from opening a new lodging establishment. Investments requiring huge fixed costs have a direct effect on the operating leverage of a firm; consequently, the analysis of the changes in the operating leverage derived from strategic decisions is a crucial aspect since it allows to shed some light on the degree of sensitivity of the firm to variations in demand. In order to operationalise the assessment of the risk, the volatility of returns is used. For this purpose, it is employed, for the first time in the hotel industry, a methodology based on GARCH-family models to detect such changes.
Valuing the business environment on a daily basis
Nicolau, Juan Luis (Elsevier, 2005-07-01)
The analysis of the environment is an outstanding topic, due mainly to the fact that the definition of any kind of strategy to be implemented has to be guided by an accurate assessment of the relevant factors that may, in a way, condition the decision-making. With this said, the chief purpose of this paper is to formalise and apply a model that allows us to analyse the business environment on a daily basis, whose main advantage is its ability to directly measure the effects of environmental factors on firm performance; the main novelty is the way the projections are measured: they are not just mere perceptions but money reactions based on expectations. An empirical application is carried out to illustrate its use, the results arrived at being outstanding since the model seems to catch quite well some of the different happenings detected, what implicates that this tool can notably aid in scanning-related activities.
Asymmetric rivalry between strategic groups: Response, speed of response and ex ante vs. ex post competitive interaction in the Spanish bank deposit market
Mas-Ruiz, Francisco J.; Nicolau, Juan Luis; Ruiz-Moreno, Felipe (Wiley, 2005-08-01)
The objective of this study is to examine asymmetric rivalry between strategic groups in a given industry. Two research hypotheses argue for the existence of asymmetric rivalry in the sense that strategic groups of small companies have a greater degree of response but a slower speed of response to the actions of strategic groups of large companies, than vice versa. To test this, we use an ex post approach that examines the news releases published on the strategic actions and reactions of firms. A third hypothesis compares ex ante competitive expectations with ex post asymmetric rivalry between strategic groups. To test this, we compare ex post news on actions/reactions with an ex ante approach that estimates conjectural variations. The empirical application carried out on bank deposits in the Spanish market defines strategic groups in terms of size due to the historical and institutional conditions of the industry (deregulatory change). The results obtained show that rivalry patterns between strategic groups in terms of company size can be predicted as asymmetric in the sense that smaller bank strategic groups have a greater degree of response (Stackelberg 'leader-follower' competitive interaction), and a slower speed of response to the actions of larger bank strategic groups than is found the other way around. Moreover, ex ante expectations of aggressiveness on the part of larger strategic groups characterize greater ex post reactions from the smaller-size strategic groups. Therefore, the size distribution of strategic groups is valuable to research on complex industries with deregulation changes.
The influence of distance and prices on the choice of tourist destinations: The moderating role of motivations
Nicolau, Juan Luis; Mas, Francisco J. (Elsevier, 2006-10-01)
The literature of tourist destination choice pays great attention to the direct impact of the attributes of "distance to the destination" and "prices of the destination", but does not reach any consensus around them regarding their-inhibitory or attraction-effect. Alternatively, our study proposes that the effects of distance and prices are moderated by tourist motivations at the moment of choosing a destination, which leads us to make hypotheses to explain this decision through the interaction between destination attributes and the personal motivations of the individual tourists. The methodology applied estimates random coefficient logit models, which control possible correlations between different destinations and consider tourist heterogeneity. The empirical application carried out in Spain on a sample of 2127 individuals, shows that the dissuasive influence of distance and prices on the selection of destinations is moderated by motivations, in the sense that the motivations have a direct (increasing the dissuasive effect) or inverse (reducing the dissuasive effect) moderating effect on the influences of distance and prices.
The economic value of patent protection and rivalry in the Spanish electrical sector
Sellers-Rubio, Ricardo; Nicolau, Juan Luis; Mas-Ruiz, Francisco J. (Emerald, 2007)
Purpose: The purpose of this paper is to estimate the economic value of patent protection and the resulting rivalry. Design/methodology/approach: An event-study is applied which uses the daily returns of shares on the stock market as an output; and a model is estimated which bases its output on Tobin's q with annual observations. Findings: The results are determined by the methodology used and the measurement of the output dimensions of company performance. Both methodologies conclude that the patent application date is the determiner of the value of an innovation. The event study methodology reflects the positive value of patent protection. Research limitations/implications: The generalisation of the conclusions of the study to other economic sectors should be made with caution, given the fact that only the electrical sector was analysed. Originality/value: The literature available on this subject suggests that empirical evidence can be affected by operational problems related to the measurement of inventive input and output. As a new contribution to the field, the paper discovers the date of input (application or grant of the patent or both) on which the company manifests innovation.
Two-stage choice process of FDI: Ownership structure and diversification mode
Ruiz-Moreno, Felipe; Mas-Ruiz, Francisco J.; Nicolau, Juan Luis (Elsevier, 2007-07-01)
Prior literature on foreign direct investment examines single-stage decision making processes based on, either the ownership structure (full vs. partial ownership), the diversification mode (Greenfield vs. acquisition), or the simultaneity of both of them (with four independent alternatives as a result of combining the ownership structure and diversification mode decisions simultaneously). This study proposes that ownership structure and diversification mode are nested and non independent decisions. However, the sequential order of the two decisions, ownership structure and diversification mode, is unknown. Thus, the current study tests the single-stage process used by previous researchers versus the two different hierarchical two-stage processes (ownership structure choice precedes diversification mode choice; and diversification mode choice precedes ownership structure choice). The empirical findings support the existence of a two-stage choice process where ownership structure choice precedes diversification mode choice. The main implication of these findings is that, given the human limited analytical capability, a hierarchical choice process can be useful to handle the information overload and the complexity inherent to the foreign direct investment choices. © 2007 Elsevier Inc. All rights reserved.
Testing reference dependence, loss aversion and diminishing sensitivity in Spanish tourism
Nicolau, Juan Luis (Fundación SEPI, 2008-05-01)
Based on Tversky and Kahneman's Prospect Theory, we test the existence of reference dependence, loss aversion and diminishing sensitivity in Spanish tourism. To do this, we incorporate the reference-dependent model into a Multinomial Logit Model with Random Parameters -which controls for heterogeneity- and apply it to a sample of vacation choices made by Spaniards. We find that the difference between reference price and actual price is considered to make decisions, confirming that reference dependence exists; that people react more strongly to price increases than to price decreases relative to their reference price, which represents evidence in favor of the loss aversion phenomenon; and that there is diminishing sensitivity for losses only, showing convexity for these negative values.
Corporate Social Responsibility: Worth-Creating Activities
Nicolau, Juan Luis (Pergamon-Elsevier, 2008-10-01)
Making the world a better place to live is an idea that is spreading over the four quarters of the globe; and the business realm is no exception. Firms are expected to have ethical responsibilities and go beyond their profit-oriented activities and boost the wellbeing of the community. This situation becomes more evident when an industry has a very close relationship with environments and societies which, in turn, are facets of its own products. This study shows that socially oriented activities carried out by tourism firms bring about benefits for society both directly (inherent to the purpose of such activities) and indirectly (via their commercial performance). The fact that getting actively involved in duties outside of the business arena has a positive influence on a firm's outcome implies that these initiatives help increase the social force of tourism through non-economic as well as economic mechanisms.
Sequential choice behavior: Going on vacation and type of destination
Nicolau, Juan Luis; Mas, Francisco J. (Elsevier, 2008-10-01)
The literature of destination choice has so far studied multi-stage decision making processes that are more representative of the general choice behavior of tourists (e.g. going on vacation, going abroad, and destination country). Alternatively, this study proposes a multi-stage decision process to the choice of tourist destination types (going on vacation, coastal character, and urban character of the destination) as these choice sets are more idiosyncratic to tourists who prefer a specific type of tourist destination (e.g. Spain with clear coastal and inland variations). In order to test this multi-stage choice process as well as the sequential order of both decisions, coastal character and urban character, the current study analyses decision processes vs. different hierarchical multi-stage processes (going on vacation and coastal character preceding urban character; and going on vacation and urban character preceding coastal character). The empirical findings support the existence of a multi-stage choice process where coastal character precedes the urban character destination choice. The main implication of these findings is that, given the limited human analytical capability, a hierarchical choice process can be useful to handle the information overload and the complexity inherent to the destination type choice.
The smile of the tourist: the relationship between price sensitivity and expenses
Nicolau, Juan Luis (Routledge, 2009-07-14)
The objective of this study is to test the effect of individual price sensitivity on holiday expenses. In the context of tourism, in such a markedly heterogeneous market, the great diversity of sensitivities to price leads the role it plays to become especially complex. Analysis of price sensitivity allows the analyst to observe how a tourist reacts when facing different product prices and, on the other hand, understanding the determinant factors of holiday expenses is crucial for organizations and destinations to implement their strategies. The methodology applied estimates random coefficient logit models that consider tourist heterogeneity. The empirical application carried out on a sample of 2127 individuals shows that price sensitivity has a non-linear influence on holiday expenditures, drawing a curious smile-shaped effect. The differentiated effect found for price sensitivities has important implications for management, as it confirms the existence of a great diversity of price sensitivities in the market. Therefore, knowing the individual by individual preference structure in terms of prices allows the pricing of the service to each individual (though extreme, it could be possible), as well as the formation of groups of individuals with similar price preferences. This price discrimination is particularly important in that it is based on the preferences of individual people. The estimation of the individual parameters of the utility function of each individual is crucial for management as it reveals consumers' preference structure and information on each individual is obtained. At a time when individuals are increasingly demanding and insist on service provision adapted to their specific needs, knowledge of the profile of each consumer allows organizations to offer the most suitable services.
Simultaneous analysis of whether and how long to go on holidays
Nicolau, Juan Luis; Mas, Francisco J. (Routledge, 2009-07-14)
This article assumes that the decision to go on holiday and the length of stay are nested and non-independent, thus the objective of this study is to propose a two-stage choice process: Going on holiday and length of stay. To do this, we rely on the randomparameter logit model, which accounts for the unobserved heterogeneity of individuals and allows representation of different correlation patterns among nonindependent alternatives. We propose hypotheses on the effect on the above decisions of individual's characteristics relating to the destination, personal restrictions and socio-demographic and psychographic characteristics. The empirical application, which is carried out in Spain on a sample of 3781 individuals, evidences the proposed two-stage choice process, and that these decisions also explained by individual tourist characteristics.
Variety-seeking and inertial behaviour: the disutility of distance
Nicolau, Juan Luis (Sage, 2010-03-01)
This study incorporates the theories of variety-seeking and inertial behaviour into the tourist decision-making process by observing the dependence of an individual's current destination choice on his or her previous choice. The literature suggests that attributes characterizing a buying alternative are crucial in understanding the individual consumption pattern. Accordingly, this study proposes that the effect of the attribute 'distance' is contingent on a tourist's variety-seeking or inertial behaviour at the moment of choosing a destination, in the sense that these behaviour types could increase or diminish the negative effect of distance. The empirical application is carried out in Spain, by applying mixed logit models. The results show that variety-seeking behaviour reduces the dissuasive effect of distance and that inertial behaviour increases it.
Culture-sensitive tourists are more price insensitive
Nicolau, Juan Luis (Springer, 2010-06-05)
The purpose of this article is to analyze the effect of the cultural interest manifested by tourists when planning a vacation on their sensitivity to price. The proposed hypothesis states that tourist price sensitivity is moderated, at the moment of choosing a destination, by cultural interest. For this purpose, we measure and identify tourists' price sensitivities-individual by individual-from real choices, i.e., tourist price sensitivity is estimated for each individual by observing the destination she actually selects. The empirical application is carried out on a sample of 2,127 individuals, and the operative formalization used to estimate individual price sensitivities follows a Random-Coefficient Logit Model; and to detect the way these sensitivities relate to the search for culture, an ANOVA procedure is employed. The results show an incremental effect of cultural interest on tourist price insensitivity; i.e., people looking for culture find their price sensitivity moderated by this interest in such a way that the negative effect of price diminishes. Also, we further explore these culture-interested tourists by a segmentation analysis, identifying five segments with different price sensitivities-one of them even showing certain high-price proneness.
The quality of quality awards: Diminishing information asymmetries in a hotel chain
Nicolau, Juan Luis; Sellers, Ricardo (Elsevier, 2010-08-01)
Services suffer to a great extent from information asymmetries because their attributes are more difficult to grasp in advance. Within services, the tourism industry is an especially notable and interesting case. Akerlof [Akerlof, G. The market for 'lemons': Quality uncertainty and the market mechanism. Quarterly Journal of Economics 1970; 84 (3): 488-500.] suggests the applicability of information asymmetries and counteracting institutions to hotel chains. To reduce these asymmetries different strategies have been proposed. Among them, quality certificates have become one of the most popular tools. However, two questions arise: one, are quality certificates effective tools to reduce information asymmetries in the tourism industry, with its inherent uncertainty? and two, are all types of existing quality certificates equally effective? Thus, the objectives of this study include analyzing the market value variation of a hotel chain due to quality certification, and to test the effect by type of award. The method builds from the event study technique and regression analysis. The results show that the stock market reacts positively to certificates, thus implying that quality certification can be a useful tool for reducing information asymmetry; however, this positive reaction is not equal for all kinds of certificates, the ISO 9000 shows the highest impact.
Anomaly in Spanish tourist sensitivity to price
Nicolau, Juan Luis (Sage, 2010-12-01)
The literature suggests that the effect of price on destination choice can be either positive or negative and income is considered an important determinant of tourist decisions, so that tourism products are thought to behave like 'normal goods'. Given that studies have paid little attention to the relationship between income and sensitivity to price, this paper analyses the relationship between income and tourists' sensitivities to price. The author identifies and measures these sensitivities - individual by individual - from real choices made by tourists: that is, tourist sensitivity to price is estimated for each individual by observing the destination he or she actually selects. The empirical application is carried out on a sample of 2,127 individuals and the operative formalization used to estimate individual sensitivities to price follows a random coefficient logit model. To detect how the sensitivities relate to income, a regression analysis is employed. The results show an anomalous relationship: income levels moderate tourist sensitivity to price such that increases in the first levels of income reduce the negative effect of price (as expected), but there is a 'saturation point' - that is, beyond a threshold, tourist sensitivity to price increases again (the negative effect of price reappears) - against expectations for these high-income earners.

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