From Competence to Capital: How Managerial Ability Shapes Hotel Market Value

A competent management team is critical to the success of a business, as their strategic decisions and leadership directly influence operational efficiency and financial outcomes. Using hotel performance data, we validate how managerial ability drives market value and competitive advantage in the hospitality industry. We measure managerial ability using the Data Envelopment Analysis (DEA) approach, analyzing 38,845 hotel-year observations across the top 40 U.S. hotel markets between 2010 and 2024. Our findings reveal that a one standard deviation increase in managerial ability is associated with a 20% higher transaction price in a sample of 1,531 hotel sales during the same period. For hotels not listed for sale, the associated market value is approximately 30% higher. Additionally, we explore the best practices through which competent managers enhance capital returns for hotel owners.