Purpose The paper studies if geographic and sector diversification allows to reduce significantly the risk exposure of a portfolio of hotel investments. The analysis considers one of the major work market for tourism, the Italian market. Design and Methodology The paper proposed tries to evaluate the benefits related to a Markowitz’s diversification approach for the construction of specialized portfolio in the hotel real estate market. Portfolio analysis considers the degree of efficiency of each portfolio, the type of diversification adopted by more efficient portfolio, the persistence of results over time and the impact of diversification constraints. Results Results achieved demonstrate that the standard geographic and sector diversification allows to achieve good results but normally more efficient portfolio are the more concentrated ones. If some concentration constraints are established the trade-off gets worse, but portfolio identified are characterized by an higher performance persistence. Research limitation / implications The analysis is released considering only high quality standards hotel in Italian market and some information about costs are not so detailed. The availability of a more complete database could increase the significance of the results obtained. Practical implications Results are relevant for constructing all hotels’ portfolios, like those managed by real estate fund manager, in order to define the type and degree of diversification that allow to minimize the risk exposure. Originality The paper proposed is the first one that applied Markowitz theory to the Italian hotel industry in order to identify the best diversification criteria.
Giannotti, C., Mattarocci, G., Spinelli, L. (2011). The role of portfolio diversification in the hotel industry: evidence from the Italian market. EUROMED JOURNAL OF BUSINESS, 6(1), 24-45 [10.1108/14502191111130299].
The role of portfolio diversification in the hotel industry: evidence from the Italian market
GIANNOTTI, CLAUDIO;MATTAROCCI, GIANLUCA;
2011-01-01
Abstract
Purpose The paper studies if geographic and sector diversification allows to reduce significantly the risk exposure of a portfolio of hotel investments. The analysis considers one of the major work market for tourism, the Italian market. Design and Methodology The paper proposed tries to evaluate the benefits related to a Markowitz’s diversification approach for the construction of specialized portfolio in the hotel real estate market. Portfolio analysis considers the degree of efficiency of each portfolio, the type of diversification adopted by more efficient portfolio, the persistence of results over time and the impact of diversification constraints. Results Results achieved demonstrate that the standard geographic and sector diversification allows to achieve good results but normally more efficient portfolio are the more concentrated ones. If some concentration constraints are established the trade-off gets worse, but portfolio identified are characterized by an higher performance persistence. Research limitation / implications The analysis is released considering only high quality standards hotel in Italian market and some information about costs are not so detailed. The availability of a more complete database could increase the significance of the results obtained. Practical implications Results are relevant for constructing all hotels’ portfolios, like those managed by real estate fund manager, in order to define the type and degree of diversification that allow to minimize the risk exposure. Originality The paper proposed is the first one that applied Markowitz theory to the Italian hotel industry in order to identify the best diversification criteria.File | Dimensione | Formato | |
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