Credit risk analysis of Serbian luxury hotels: Impact of COVID-19

Ana Jovancai Stakić; Vule Mizdraković; Maja Kljajić

doi:10.5937/menhottur2302075J

Authors

Ana Jovancai Stakić Singidunum University, Faculty of Tourism and Hospitality Management, Belgrade, Serbia https://orcid.org/0000-0002-6040-8839
Vule Mizdraković Singidunum University, Faculty of Tourism and Hospitality Management, Belgrade, Serbia https://orcid.org/0000-0002-7886-9203
Maja Kljajić Singidunum University, Faculty of Business in Belgrade, Belgrade, Serbia https://orcid.org/0000-0002-2232-5725

DOI:

https://doi.org/10.5937/menhottur2302075J

Keywords:

hotel industry, pandemic, financial statements, financial sustainability, predictive models

Abstract

The aim of this research is to analyse credit risk levels of Serbian luxury hotels, before, and during the COVID-19 pandemic. The purpose is to highlight the need for state-supported measures and proactive strategies to ensure financial sustainability and resilience in the luxury hotel industry. A dataset of 192 observations from 2019 to 2021 is employed, using predictive models including the Altman Z'-score, Altman Z''-score, Kralicek DF score, Springate S-score, and Zmijewski X-score, to assess creditworthiness of 64 selected mostly 4-star hotels. Data analysis involved the use of statistical tests such as the Kolmogorov-Smirnov test, Shapiro-Wilk test, and Wilcoxon signed-rank test. All models, except Zmijewski, show statistically significant results. The findings reveal a significant impact of the pandemic on credit risk levels in 2020, followed by positive trends in 2021, indicating successful adaptation and resilience. Policymakers, financial institutions, and hoteliers can use these insights to navigate the post-pandemic era effectively.

Downloads

Download data is not yet available.

References

Abraham, V., Bremser, K., Carreno, M., Crowley-Cyr, L., & Moreno, M. (2020). Exploring the consequences of COVID-19 on tourist behaviors: Perceived travel risk, animosity and intentions to travel. Tourism Review, 76(1), 701–717. https://doi.org/10.1108/TR-07-2020-0344

Al-Awadhi, A., Alsaifi, K., Al-Awadhi, A., & Alhammadi, S. (2020). Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns. Journal of Behavioral and Experimental Finance, 27(1), 100326. https://doi.org/10.1016/j.jbef.2020.100326

Altin, M., Kizildag, M., & Ozdemir, O. (2016). Corporate governance, ownership structure, and credit ratings of hospitality firms. The Journal of Hospitality Financial Management, 24(1), 5–19. https://doi.org/10.1080/10913211.2016.1166022

Altman, E. (1968). Financial ratio, discriminate analysis and prediction of corporate bankruptcy. Journal of Finance, 23(4), 589–629. https://doi.org/10.2307/2978933

Altman, E. (2002). Corporate distress prediction models in a turbulent economic and Basel Ii environment. NYU Working paper No. S-CDM-02-11. Retrieved July 15, 2023 from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1295810

Brown, K., & Moles, P. (2014). Credit risk management. Edinburgh: Edinburgh Business School.

Chan, J., Gao, Y., & McGinley, S. (2021). Updates in service standards in hotels: How COVID-19 changed operations. International Journal of Contemporary Hospitality Management, 33(5), 1668–1687. https://doi.org/10.1108/IJCHM-09-2020-1013

Chen, M., Demir, E., García-Gómez, C., & Zaremba, A. (2020). The impact of policy responses to COVID-19 on U.S. travel and leisure companies. Annals of Tourism Research Empirical Insights, 1(1), 100003. https://doi.org/10.1016/j.annale.2020.100003

Clark, J., Mauck, N., & Pruitt, S. (2021). The financial impact of COVID-19: Evidence from an event study of global hospitality firms. Research in International Business andFinance, 58(1), 101452. https://doi.org/10.1016/j.ribaf.2021.101452

Crespí-Cladera, R., Martín-Oliver, A., & Pascual-Fuster, B. (2021). Financial distress in the hospitality industry during the COVID-19 disaster. Tourism Management, 85(1), 104301. https://doi.org/10.1016/j.tourman.2021.104301

Ding, W., Levine, R., Lin, C., & Xie, W. (2021). Corporate immunity to the COVID-19 pandemic. Journal of Financial Economics, 141(1), 802–830. https://doi.org/10.1016/j.jfineco.2021.03.005

Duro, J., Perez-Laborda, A., Turrion-Prats, J., & Fernández-Fernández, M. (2021). COVID-19 and tourism vulnerability. Tourism Management Perspectives, 38(1), 100819. https://doi.org/10.1016/j.tmp.2021.100819

Ghorbani, A., Mousazadeh, H., Akbarzadeh Almani, F., Lajevardi, M., Hamidizadeh, M., Orouei, M., & Dávid, L. (2023). Reconceptualizing customer perceived value in hotel management in turbulent times: A case study of isfahan metropolis five-star hotels during the COVID-19 pandemic. Sustainability, 15(8), 7022. https://doi.org/10.3390/su15087022

Gössling, S., Scott, D., & Hall, C. (2020). Pandemics, tourism and global change: a rapid assessment of COVID-19. Journal of Sustainable Tourism, 29(1), 1–20. https://doi.org/10.1080/09669582.2020.1758708

Gootkind, C. (2023). Fundamentals of credit analysis - CFA Program Curriculum level I. Retrieved July 5, 2023 from https://www.cfainstitute.org/en/membership/professional-development/refresher-readings/fundamentals-credit-analysis

Jiang, B. (2023). Analysis of Marriott’s financial position under the epidemic. Highlights in Business, Economics and Management, 10(1), 122–126. https://doi.org/10.54097/hbem.v10i.7965

Jovanović, S., & Ilić, I. (2017). Regional features of tourism and hotel industry in the Republic of Serbia. In D. Cvijanović et al. (Eds.). Tourism in Function of Development of the Republic of Serbia – Тourism Product as a Factor of Competitiveness of the Serbian Economy and Experiences of other Countries. Thematic Proceedings II (pp. 538–555). Vrnjačka Banja: Faculty of Hotel Management and Tourism in Vrnjačka Banja.

Koh, E. (2020). The end of over-tourism? Opportunities in a post-Covid-19 world. International Journal of Tourism Cities, 6(4), 1015–1023. https://doi.org/10.1108/IJTC-04-2020-0080

Kozhamzharova, G., Omarbakiyev, L., Kogut, O., Zhumasheva, S., Saulembekova, A., & Abdrakhmanova, G. (2022). Banking risks and lending to tourism and hotel businesses amid the COVID-19 pandemic. Journal of Environmental Management and Tourism, 13(2), 427–437. https://doi.org/10.14505/jemt.13.2(58).12

Lončarević, S. (2015). Comparison to Kralicek DF indicators and Altman Z-Score model for Serbian metal industry. International Journal of Industrial Engineering and Management (IJIEM), 6(4), 199–204.

Matejić, T., Knežević, S., Arsić, V., Obradović, T., Milojević, S., Adamović, M., & Špiler, M. (2022). Assessing the impact of the COVID-19 crisis on hotel industry bankruptcy risk through novel forecasting models. Sustainability, 14(8), 4680. https://doi.org/10.3390/su14084680

Metaxas, T., & Romanopoulos, A. (2023). A literature review on the financial determinants of hotel default. Journal of Risk and Financial Management, 16(7), 323. https://doi.org/10.3390/jrfm16070323

Mijailović, O., Kljajić, M., Mizdraković, V., & Kilibarda, N. (2023). The profitability of the meat industry in Serbia: Did the COVID-19 pandemic have any impact? Meat Technology, 64(1), 41–49. https://doi.org/10.18485/meattech.2023.64.1.4

Mizdraković, V., Knežević , G., & Stanić, N. (2015). Bankruptcy risk exposure of Serbian hotels in the period 2008-2012. Sitcon: Tourism Destination Competitiveness (pp. 164–167). Belgrade, Serbia: Singidunum University.

Nagaj, R., & Žuromskaitė, B. (2021). Tourism in the era of COVID-19 and its impact on the environment. Energies, 14(7), 2000. https://doi.org/10.3390/en14072000

Nicola, M., Alsafi, Z., Sohrabi, C., Kerwan, A., Al-Jabir, A., Losifidis, C., & Agha, R. (2020). The socio-economic implications of the coronavirus pandemic (COVID-19): A review. International Journal of Surgery, 78(1), 185–193. https://doi.org/10.1016/j.ijsu.2020.04.018

Organisation for Economic Co-operation and Development (OECD). (2022). Tourism trends and policies 2022. Retrieved July 1, 2023 from https://www.mlit.go.jp/kankocho/content/001577527.pdf

Ozdemir, O., Dogru, T., Kizildag, M., Mody, M., & Suess, C. (2019). Quantifying the economic impact of COVID-19 on the U.S. hotel industry: Examination of hotel segments and operational structures. Tourism Management Perspectives, 39(1), 100864. https://doi.org/10.1016/j.tmp.2021.100864

Papana, A., & Spyridou, A. (2020). Bankruptcy prediction: The case of the Greek market. Forecasting, 2(4), 505–525. https://doi.org/10.3390/forecast2040027

Park, S., & Hancer, M. (2012). A comparative study of logit and artifi cial neural networks in predicting bankruptcy in the hospitality industry. Tourism Economics, 18(2), 311–338. https://doi.org/10.5367/te.2012.0113

Penciakova, V., Sander NGourinchas, P., & Kalemli-Ozcann, S. (2020). COVID-19 and SME failures. NBER Working Paper 27877.

Radivojević, V., Dimovski, J., & Mitić, G. (2023). Quantifying the financial impact of COVID-19 on the largest global companies in the hotel industry. Hotel and Tourism Management, 11(1), 165–176. https://doi.org/10.5937/menhottur2301165R

Sarwari, S., Huq, S., & Minar , T. (2021). COVID-19: The way luxury hotels deal with the pandemic. International Journal of Tourism and Hospitality Management in the Digital Age, 5(2), 1–13. https://doi.org/10.4018/IJTHMDA.20210701.oa5

Skare, M., Soriano, D., & Porada-Rochon, M. (2021). Impact of COVID-19 on the travel and tourism industry. Technological Forecasting and Social Change, 163(1), 120469. https://doi.org/10.1016/j.techfore.2020.120469

Stakić, A., & Stakić, N. (2020). Various sources of financing the development of rural tourism in the Republic of Serbia. In D. Cvijanović et al. (Eds.). Tourism in Function of Development of the Republic of Serbia – Tourism and Rural Development (pp. 179–196). Vrnjačka Banja: Faculty of Hotel Management and Tourism in Vrnjačka Banja.

Statista. (2023). Economy & Politics - Impact of the coronavirus pandemic on the global economy - Statistics & Facts. Retrieved June 20, 2023 from https://www.statista.com/topics/6139/covid-19-impact-on-the-global-economy/#topicOverview

Statistical Office of the RS. (2023). Tourists arrivals and overnight stays by regions and areas - Annual data. Retrieved September 16, 2023 from https://data.stat.gov.rs/Home/Result/220201?languageCode=en-US

Susetyo, A., & Susilowati, D. (2023). Hotel chain bankruptcy prediction: Comparison of the Altman, Springate, and Zmijewski models. Proceeding of International Students Conference on Accounting and Business, 2(1), 867–884.

Vasilakakis, K., Tabouratzi, E., & Sdrali, D. (2023). Economic sustainability of tourism enterprises: A proposal of criteria in the hotels. International Journal of Professional Business Review, 8(4), 1–7. https://doi.org/10.26668/businessreview/2023.v8i4.1769

Vivel-Búa, M., Lado-Sestayo, R., & Otero-González, L. (2018). Risk determinants in the hotel sector: Risk credit in MSMEs. International Journal of Hospitality Management, 70(1), 110–119. https://doi.org/10.1016/j.ijhm.2017.11.004

Wieczorek-Kosmala, M. (2021). COVID-19 impact on the hospitality industry: Exploratory study of financial-slack-driven risk preparedness. International Journal of Hospitality Management, 94(1), 102799. https://doi.org/10.1016/j.ijhm.2020.102799

World Travel & Tourism Council (WTTC). (2022). Critical factors to attract hotel investment. Retrieved June 21, 2023 from

https://wttc.org/Portals/0/Documents/Reports/2022/Critical-Factors-To-Attract-Hotel_Investment.pdf

World Travel & Tourism Council (WTTC). (2023). Economic impact research. Retrieved July 20, 2023 from https://wttc.org/research/economic-impact

World Travel & Tourism Council (WTTC). (2022a). Serbia 2022 annual research: Key highlights. Retrieved September 16, 2023 from https://wttc.org/DesktopModules/MVC/FactSheets/pdf/704/197_20220613170452_Serbia2022_.pdf

Zainol Abidin, J., Abdullah, N., & Khaw, K. (2021). Bankruptcy prediction: SMEs in the hospitality industry. International Journal of Banking and Finance, 16(2), 51–80. https://doi.org/10.32890/ijbf2021.16.2.3

Zenzerović, R., & Peruško, T. (2006). Kratki osvrt na modele za predviđanja stečaja [Short retrospection on bankruptcy prediction models]. Ekonomska istraživanja – Economic Research, 19(2), 132–151.