Document Type

Article

Publication Date

8-1-2006

Abstract

Investments in various forms of intellectual capital improve operating performance, according to the results of a study of 563 United States hotels. Using the hotels' operating income as a measure of profitability, the study found that investments in certain forms of intellectual capital have a greater impact on profitability than others do. Controlling for the market value of the physical assets, occupancy, and the cost of living, the study analyzed the influence of expenditures on the following two forms of external intellectual capital: brand and operating company; and the following three forms of property-level human capital: service employees, support employees, and professional employees. Although the sample was divided into full-service hotels and limited-service properties, the results for both segments were similar for most forms of intellectual capital. First, the greater the expense incurred-or investment made-on an operating company and brand affiliation, the higher the profitability for both limited-service and full-service hotels. In addition, when either type of hotel spends more money on its service employees it realizes higher profitability. However, regardless of whether the hotel is full-service or limited-service, investing in professional employees did not significantly influence profitability. Not only that but expanded expenditures in support employees had a negative influence on profitability for limited-service hotels and no influence for full-service properties.

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