The Degree of Profit Persistence in the Tourism Industry: The Case of Norwegian Campsites

Abstract

Purpose: To gain more knowledge about the profit rate and whether it persists over time for campsites. Many international articles have analysed the degree of profit persistence but in other sectors than campsites.This provides insight in how the market for campsites works. An anlasis of profit persistence for Norwegian campsites is relevant for the rest of the tourist sector as well as campsites in other countries. Design/Methodology/Approach: The study is based on public available data for the last 10 years for all Norwegian campsites and consists of 292 firms where 164 are included in this research. A quantitative approach (regression models) using panel data and system GMM estimators. Hypothesis testing. Finding: The findings indicate that there is a positive significant profit persistence for those campsites with high initial profits. Furthermore, the relative profit rates depend on firm-specific factors. There is a significant positive correlation between growth and profit rate, and there is also a negative link between debt ratio and profit rate for firms with an initial low profit rate. Company size does not have significant impact on the profit rate. Practical implications: The existence of profit persistence suggests an absence of well-functioning market. Companies can do it worse or better than the sector average over a longer period. This provides knowledge about which companies are resilient and weak. This is important information for banks and others who provide loans. Originality/value: This study implements a method to identify the speed of adjustment to normal profit in the campsites sector. There are few studies that have applied this method for Norwegian companies and for campsites wordwide. By using GMM (general method of moments) one gets more consistent estimators than OLS (ordinary least squares).