Sustainability of Hotels: Evidence from Tourism Industry in Sri Lanka

Abstract

The present studyexplores the sustainability level of the Sri Lankan hotels in the tourism industry.It wasobserved that the return on equity has been decreasing in the hotel companies though there is an increasing trend in the tourist arrivals in Sri Lanka(Weerasinghe et al., 2019). This unanswered problem raises the questionof whether the hotels in the tourism industry are heading towards bankruptcy. This study used secondary data from the annual reports of 34 listed hotels, which are registered in the Colombo Stock Exchange during the last five years (2015-2019). This study applied the Altman’s original Z score model (1968) which is the most accurate and reliable in forecastingthe sustainability of the firms by using ratio analysis method. The finding of the study reveals that 91% of the hotels are in the distress zone, 9% safe zone and none in the gray zone. The present study is significant since it shedsthe light, through the empirical evidence on the scary financial environment, which signals the hotels in the tourism industry in Sri Lanka,about the doubt of going concern