Does the Hotel Industry Create Value for Owners? The Empirical Analysis of Residual Income: The Case of Slovenia and Croatia

Th is paper aims to analyze the residual income of the Slovenian and Croatian hotel industry for the period covering 2005–2008. Th e residual income not only looks at return on invested funds, but also implicitly compares it with the risk adjusted opportunity cost of such an investment. Th is parameter is therefore a better performance measure than simply accounting performance measures. Th e results of the analysis prove that residual incomes of Slovenian and Croatian hotels were far from being positive during the whole period. Th e obtained fi ndings demonstrate that hotel companies in aggregate did not create value for their owners and that they did not generate enough profi ts to cover the appropriate cost of capital i.e. the cost of capital that takes into consideration the risk adjusted opportunity cost.