Factors influencing fixed assets investments in the U.S. hospitality industries

Although investments in fixed assets are important aspects of financial management, there are few studies focusing on this aspect of corporate finance in the hospitality literature. This study investigates factors that affect investment in fixed assets in both the lodging and restaurant industries. Investment in fixed assets for lodging firms was found to be negatively influenced by financial leverage; however, liquidity ratio had a positive relationship to investments. Particularly in the restaurant industry, financial leverage and firm size showed a negative relationship to investment in fixed assets, whereas profitability and liquidity ratios had a significant positive relationship with restaurant investment in fixed assets. Results of this study reemphasize that restaurants, although more profitable than lodging businesses, rely mostly on internal cash flows for their investments.