An examination of the curvilinear relationship between capital intensity and firm performance for publicly traded US hotels and restaurants

Purpose: This study sets out to examine the potential curvilinear relationship between capital intensity and firm value for the US hospitality industry, specifically including publicly traded US hotels and restaurants, during the period 1990-2008. Design/methodology/approach: This study performs a pooled regression analysis to examine the proposed relationship. The sampled companies are from the period 1990-2008, consisting of 281 and 1,406 observations for the hotel and restaurant industries, respectively. The study additionally performs the analysis for the 1990s and the 2000s separately for a comparison purpose. Findings: The findings support the U-shaped relationship between capital intensity and firm performance during the 2000s for both hotels and restaurants, while no relationship exists during the 1990s. Research limitations/implications: While the results may not be generalizable to private or non-US hotels and restaurants, the findings should provide hotel and restaurant executives and managers with valuable information for developing their strategies with regard to the capital intensity level. Originality/value: Based on the two perspectives regarding capital intensity's impact on a firm (i.e. positive and negative), a possible proposal suggests that the relationship between capital intensity and a firm's value may not be linear, but possibly curvilinear. Considering the importance of capital intensity in the hospitality industry, examinations of the issue would be beneficial for the hospitality industry.