An Empirical Investigation of Governance Structures in the Hotel Industry

The study investigates alternative governance forms in the hotel industry. We analyze the choice among independently owned firms, voluntary chains, franchising, and vertically integrated chains. Based on agency theory, we argue 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 employed by principals given local market conditions, agent incentives, and risk preferences. We augment the established principal-agent perspective with a discussion of agent motivations to join hotel alliances. Data from 650 hotels indicate that the number of service offerings, distance to headquarters, population, population density, and hotel scale influence governance.