Governance structures in the hotel industry

Abstract

This study investigates alternative governance forms in the hotel industry. Agency theory maintains that the need for control over service quality, financial risk, and the market environment affect the choice of governance form. Prior agency research emphasizes alternative governance structures that principals employ, given local market conditions, agent incentives, and risk preferences. The study augments the established principal–agent perspective with a discussion of entrepreneurial motivations to join hotel alliances. The study analyzes the choice between independent ownership and affiliation with a voluntary chain as well as the choice between integration and franchising. Data analyses from 650 hotels indicate that the hotel size, amenities, population, and distance to headquarters influence governance.