The effects of the minimum wage on the operating performance of hotels in the U.S.

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Abstract

The economic effects of the minimum wage have been the focus of ongoing contradictory debates among policymakers and researchers. This study finds a positive effect of the minimum wage on the operating profitability of hotels in the U.S. However, the pricing practices of full-service hotels are dissimilar to those of limited-service hotels. Although the burden of the minimum wage is substantial, full-service hotels can spread the weight onto other departments, while limited-service hotels mainly rely on rooms revenue. Thus, the effects of the minimum wage on room price (average daily rate; ADR) are more substantial at limited-service hotels than at full-service hotels even though operating profitability (gross operating profit per available room; GOPPAR) is not substantially different between them. Eventually, increased minimum wage can play a beneficial role not only for the hotel industry but also for local society, since minimum wage employees take home a larger salary.

Original languageEnglish
Article number104205
JournalTourism Management
Volume82
DOIs
Publication statusPublished - Feb 2021

Keywords

  • ADR
  • Full-service hotels
  • GOPPAR
  • Limited-service hotels
  • Minimum wage

ASJC Scopus subject areas

  • Development
  • Transportation
  • Tourism, Leisure and Hospitality Management
  • Strategy and Management

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