Analysis of driving factors for capacity investment in the Norwegian hotel industry

Master's thesis in Industrial economics The purpose of this study is to assess the importance of a range of different economic, financial and locational factors, in how they influence the collective will to invest in capacity in the Norwegian hotel industry. Relations are investigated for the Norwegian market as a whole, and while it does not aim to reflect the individual investors willingness to invest, the selection of dependent variables is made from key driving factors as defined by individual investors. These factors were chosen in coherence with previous literature, like Newell and Seabrook’s (2006) investigation of factors influencing hotel investment decision making, and Luo and Lam’s (2017) research on urbanizations effect on hotel performance. But, uniquely for the Norwegian hotel market, the present study presents empirical evidence for the effects of three main groups of variables, namely “demand”, “financial and economical” and “urbanization”. My findings add to Luo and Lam’s work, that indicators of urbanization, like GNP per capita and people living in urban areas, have a positive relation on capacity as well as performance. Also, I provide reasoning for the significant positive impacts of variables describing demand, such as population, hotel visitors and air-travelers, as well as variables like GNPB, currency rates and interest rates, that describe the financial and economic state.