The Impact of Macroeconomic Factors on the Hotel Industry Through the Financial Leverage Trends

Abstract

In Portugal, news shows that the impact of COVID-19 in the hospitality sector was more noticeable compared to other sectors. This chapter aims to understand the historical trends of hotel industry financial leverage and to analyse the impact of macroeconomic factors on it. Based on the Portuguese reality, it aims to propose a model to be used by managers and shareholders to control the effect of financial leverage over their companies. Two issues are supporting this study: one is if companies evaluate the impact of the chosen financing sources on shareholders' return; another is to understand whether there is a change in the financial leverage effect, either due to macroeconomic factors or due to cyclical factors not controlled by the market, such as the current pandemic (COVID-19) which demands new challenges to companies. Results highlight that the perception of financial leverage by hotel managers is crucial in crisis situations, as the current case of the pandemic caused by COVID-19.