Microsoft Word 2007 ichrie conference Proceedings Final-Final 06-06-07. doc

Hospitality and Capital Structure 
Related literature in the hospitality industry has focused mainly on the capital structure of lodging firms 
and comparing them with firms in other industries (Sheel, 1994). Lodging firms face exposure to interest rate risk 
when they use debt financing for their capital expenditures. In one study, Andrew (1993) find an estimated 50% to 
65% of the capital structure of lodging firms is comprised of debt, implying that lodging firms are heavy debt users.
In another study, Upneja and Dalbor (2001) find a significantly positive relation between growth opportunities and 
long-term debt for lodging firms, indicating that lodging firms are more likely to use long-term debt to finance their 
growth.
METHODOLOGY 
The purpose of this study is to investigate the interest rate exposure of lodging firms and whether the use of 
financial derivatives reduces this exposure for a sample of lodging firms, casino firms, and REITs, for the period 
from 2000 to 2004. This section provides a description of the methodology used in measuring the interest rate 
exposure.

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