Financial struggles of a growing industry: A study on the profitability of tourism businesses in Nor
ABSTRACT This study investigates the profitability of tourism businesses in Norway. Financial data for 2013 is extracted from the national register for 8083 businesses from five sectors of the tourism industry; accommodation, food and drink, travel and tourism, transport, and leisure. Forty-two percent were loss making in 2013 while a further 42 percent made a profit of less than 500,000 Norwegian kroner. In general, more than half of all tourism businesses generate inadequate rates of return in terms of operating and net profit margins. Determinants of profitability were investigated using panel data analysis on individual businesses from 2005 to 2013. Three factors were found to have a significant effect on profitability measured according to return on average assets: age of business (positive effect), cost-to-income ratio (negative effect), and debt-to-equity ratio (positive effect). The results highlight the importance of developing businesses with longevity and operational efficiency. There is also likely to be a reliance on external sources of finance that allow tourism businesses to fund new investments that help to improve profitability.
