Lodging REITs and third-party operators: Do more operators enhance the performance of REITs?

Lodging REITs are required to hire unaffiliated third-party operators to manage their properties. It has been noted that some lodging REITs use only one operator, whereas others hire a number of different operations. However, why lodging REITs choose to hire one or more operators has not been verified yet. Accordingly, this study intended to examine whether hiring more operators (i.e., operator diversification) affects the performance of lodging REITs. The results of this study showed that diversifying third-party operators has a curvilinear relationship with firm performance. Furthermore, the curvilinear relationship can weaken when operator diversification is paired with geographic diversification, but the relationship does not change depending on segment or brand diversification. This study implies that it is critical to understand not only the appropriate number of operators but also how to combine diversification strategies to ensure the success of lodging REITs.