1. Introduction
The COVID-19 pandemic has caused unprecedented challenges for the hospitality industry worldwide, leading to significant impacts on businesses of all sizes [
1]. As a result, hospitality firms have had to rethink their strategies and operations and navigate supply chain disruptions, reduced demand, revenues, and increased uncertainty [
2]. Consequently, it has become essential for managers and policymakers to explore new strategies to sustain the performance and growth of hospitality firms during this crisis.
One potential resource for firms to maintain sustainable performance and growth is intellectual capital (IC), which refers to a firm’s intangible assets, such as human, relational, and structural capital [
3]. IC has been identified as a key driver of firm performance and innovation, particularly in knowledge-intensive sectors, such as the hospitality industry [
4]. However, there has been limited research on the impact of IC on the performance and growth of hospitality firms during the COVID-19 crisis.
Therefore, this study aims to investigate the role of IC in the sustainable performance and growth of small and large European hospitality firms during the pandemic. Specifically, we will examine the impact of human, relational, and structural capital on the profitability and asset growth (AG) of firms operating in the accommodation, food, and travel sectors and compare the results across small and large firms. By doing so, we hope to contribute to the literature on IC and financial performance and gain insights into the unique challenges and opportunities facing the hospitality industry during the COVID-19 crisis. The findings of this study may also inform managers and policymakers in the hospitality industry as they seek to build sustainable and resilient businesses in the post-COVID era.
This study is relevant because the COVID-19 pandemic has led to the adoption of new strategies in the hospitality industry to deal with its effects, such as the shift towards technology-centered business models that rely more heavily on IC [
5]. Before the pandemic, the European hospitality industry was experiencing significant growth in the number of hotels and overnight stays [
6]. However, policy responses to the pandemic have taught us new strategic ways to leverage IC for better performance. Therefore, evaluating how firms have adjusted their structural capital in response to the pandemic is also important [
7]. The decline of the hospitality industry due to the pandemic has led to a significant reduction in the number of workers [
8,
9], making it essential to explore the role of human capital in the industry’s sustainability.
The literature suggests that IC positively affects firms’ profitability through increased incentive capabilities [
10,
11,
12] in developed and developing economies. Some researchers have studied IC for firms operating in different countries and industries and found that IC performs a crucial role during the pandemic [
13,
14,
15,
16]. More recently, Ref. [
17] studied the role of structural capital in the business industry’s financial cash flow for uncertainty. With respect to the hospitality industry, Ref. [
18] found that IC was a relevant factor before and during COVID-19 for the Serbian hospitality firm’s performance.
While previous studies have examined the impact of IC on firm profitability in various countries and industries, little research has been completed on the role of all three components of IC, i.e., human, structural, and relational, in developed countries’ economies, where the pandemic has brought new technological advancements to improve the hospitality industry. This study attempts to fill this gap in the literature by providing deeper insights into the importance of IC for EU countries. The hospitality industry is a crucial sector for many EU countries, employing millions of people and contributing significantly to their economies. By understanding the impact of IC on the profitability and asset growth of firms in this industry, policymakers, and business leaders can make more informed decisions about where to allocate resources and investments.
Moreover, this study examines the relationship between IC and AG in the hospitality industry, as corporate asset developments are crucial in linking IC and industry performance and are fundamental for material and immaterial firm growth [
19]. The study adds to earlier research that analyzed IC during times of crisis in many businesses only with respect to financial performance.
Lastly, exploring the differences in IC between small and large hospitality firms during a crisis is important, as these types of firms may have different resources and capabilities to manage the crisis. Additionally, the crisis may affect small and large firms differently, and understanding these differences could help design policies and strategies to support the sustainability of the hospitality industry. This insight is particularly relevant for policymakers seeking to support small- and medium-sized enterprises in the hospitality industry, as they may have different needs and challenges compared to larger firms.
This study’s findings suggest that effective management of IC performs a crucial role in the survival of the hospitality industry, especially during periods of financial turmoil. The study highlights the importance of investing in human capital through ongoing training and development programs to enhance employees’ professional competencies and boost their productivity. Additionally, the effective use of structural capital can contribute to employee productivity and professional development. Furthermore, the effective management of relational capital can lead to increased customer retention, higher revenue, and improved profitability, which are essential for the long-term success of a firm in the hospitality industry. The study emphasizes the interdependence between IC and physical assets and the need for a balanced approach to investment in both areas. By adopting such an approach, hospitality firms can achieve improved financial performance and maximize their return on investment. These findings provide valuable insights for hospitality managers and financial analysts seeking to improve their organizations’ performance and profitability.
Overall, this study’s findings provide valuable guidance for policymakers, investors, and business leaders in EU countries, emphasizing the importance of investing in human and relational IC and enhancing structural IC to drive sustainable growth and profitability in the hospitality industry, especially in times of crisis, such as COVID-19. By leveraging these insights and implementing strategies to support IC development, EU countries can strengthen their hospitality industry’s resilience and competitiveness, creating a more prosperous and sustainable future for all.
The remainder of the study is organized such that
Section 2 discusses the literature and hypothesis development, followed by a brief discussion of the empirical methodology in
Section 3.
Section 4 discusses the results of the study, and
Section 5 summarizes the findings and practical implications.
2. Literature Review and Hypothesis Development
IC components are related to the resource-based view (RBV) and knowledge-based theory, which have been the overarching themes for the hospitality industry in the last 20 years and provide support for the theoretical foundation [
18,
20]. According to RBV, a company’s performance is influenced by its unique, strategic resources, which give it a competitive advantage in finance [
7]. According to the knowledge-based theory of the firm, innovation, creativity, efficiency, and customer satisfaction are vital in achieving sustainable competitive advantage [
13]. As a company’s strategic assets are both tangible and intangible, one should exercise extreme caution when making investments and evaluating the contribution of the company’s perceptible and immaterial assets because it is difficult to separate their effects from one another [
10]. This implies that while continuously aiming to maximize the synergy effect, investment in one type of AG may directly or indirectly impact the investment in additional support [
19]. The knowledge that can be turned into value or intellectual assets [
11] is what generates a company’s revenue in finance [
21]. Knowledge product structural generativity is essential for expanding talent retention in knowledge-intensive offerings and setting them apart from the firm’s competition [
22].
IC is crucial for creating value and improving performance, and companies must focus on investing in and utilizing IC practically to provide quality goods and services [
8,
9,
23]. Human and structural capital combine to form IC, with employee knowledge, skills, capabilities, motivation, and experience critical to value creation [
15]. The value of human capital rises due to employees’ professional development, and the company should make additional investments in capital, growth assets, and structural assets to generate value for company finance [
13].
H1. Human capital positively and significantly impacts the hospitality firm’s profitability and AG during the crisis.
Ref. [
24] state that structural capital allows the impact of IC to be seen in the firm’s financial fluency, with all non-human knowledge resources and organizational procedures being related to structures for conducting commercial transactions. Structural capital enables the workforce to enhance their on-the-job performance, which helps to improve overall FP [
25]. Additionally, structural capital in terms of the organization’s profitability is more critical for overall performance [
15]. Relational capital includes a company’s brand equity, reputation, customer relationships, partnership agreements, licenses, and knowledge derived from relationships with internal and external stakeholders [
26].
Performance and IC are critical components in developing an organization’s overall FP [
27,
28]. Despite extensive research on the connection between IC and performance [
13,
29,
30], it is claimed that businesses continue to use IC ineffectively [
31]. During a crisis, the situation deteriorates even more, and management must examine the organization’s essential traits and resources to pinpoint particular risk areas that need attention [
8].
Metrics used by management to monitor a company’s financial success and improve its strategy include profitability indicators [
32]. These data assist managers and financial analysts in determining the activities and performance of a hotel’s strengths and weaknesses, and the effectiveness of carrying out recent and past actions [
15]. Indicators of profitability that are frequently used in the hotel industry include return on assets (ROA), return on equity (ROE), and revenue per available room (RPR). Traditional measurements are crucial control tools for evaluating tourism from the hospitality performance perspective [
33]. Effective use of human, structural, and rational capital can also contribute to high performance [
34].
H2. Structural capital positively and significantly impacts the hospitality firm’s profitability and AG during the crisis.
According to [
15], performance is influenced by both external factors, such as competition, and internal factors, such as employee productivity. Some studies in the hotel and tourism sector partially confirmed that the impact of IC on business performance is related to AG [
35]. However, previous research suggests a weak or only marginally significant relationship between IC and performance, which is related to financial effectiveness [
36].
Furthermore, the COVID-19 pandemic has significantly affected the hospitality industry, and studies examining the impact of IC and other factors on business performance during this crisis are needed [
19]. Comparing outcomes between the pandemic and pre-pandemic periods can also provide valuable insights for hotel management to adjust their strategies accordingly. Ultimately, effective utilization of both tangible and intangible assets can lead to improved financial success and sustainable growth for hotels in the long run.
It is important to understand the relationship between assets and employee performance and how human intellectual capital can contribute to both productivity and financial performance [
20]. Improving employee knowledge, skills, attitude, and tangible assets, can lead to better performance outcomes [
37]. Additionally, AG’s role in effectively using intangible capital to achieve satisfactory employee performance is a critical area of research. This information can help managers and financial analysts to understand better the factors contributing to a company’s success and inform strategies to improve performance [
8,
31,
38].
Previous studies found that profitability has benefited through effective IC management [
37,
39]. Hotels’ success is significantly impacted by human capital, an essential element of IC [
40]. Workers’ capacity to develop their professional competencies is increased by structural capital [
41]. Furthermore, IC usage significantly affects employee performance, and its favorable impact on employee performance will affect the company’s performance [
31,
42]. The study by [
43] found that the COVID-19 crisis negatively influenced company performance, particularly low-performing businesses, in most sectors and raised firm risk. Furthermore, the study discovered that the national government’s effectiveness is crucial in reducing the detrimental effects of COVID-19 on business operations and performance.
Knowledge is a prerequisite for human productivity, and applying knowledge increases its applicability [
10]. Managers must enhance the staff structure and invest in human capital via ongoing training to boost employees’ contribution to firm performance, particularly in developing economies ([
41]. Workers with high levels of human capital create value and are more productive, improving resource use and increasing production efficiency [
44]. As a foundation for IC, structural capital fosters employee performance improvement [
28].
Moreover, the effect of asset finance on the relationship between IC and hotel profitability metrics is very important [
8]. The results revealed that investing in one form of asset, either directly or indirectly, obstructs investing in other assets since there is a synergy between physical assets and IC [
45]. Even though the knowledge-based economy has altered the strategic role of assets in firms [
39], the success of hotels’ business operations and their ability to perform satisfactorily is dependent on how effectively they use both asset growth and IC [
37]. Using structural capital and other components of IC more effectively can increase hospitality performance. The fact that IC is far more crucial than asset growth for producing value in service-based sectors might be one reason for this detrimental effect [
46]. There is a link between IC and hospitality firms’ financial performance in small and large organizations, as there is a human, structural, and rational capital expending role that can improve asset and hospitality performance in developed countries.
H3. Relational capital positively and significantly impacts the hospitality firm’s profitability and AG during the crisis.
5. Conclusions
The study aims to determine the influence of IC on sustainable firm performance during the COVID-19 pandemic crisis, with a focus on the impact of IC on firms’ profitability and asset growth. It also examines the value of resources (human, structural, and rational capital) during times of crisis for small and large hospitality firms. Based on a sample of 42,516 hospitality sector firms operating in 18 EU countries during the period between 2012 and 2021, the empirical findings show that IC has a significant impact on the profitability and growth of these firms. Specifically, human intellectual capital positively impacts the profitability of large firms and SMEs before and during the COVID-19 crisis but has a negative impact on AG. In contrast, structural intellectual capital had a negative impact on AG but no impact during the COVID-19 crisis. Relational, intellectual capital had a positive impact on the profitability of both large firms and SMEs before and during the COVID-19 crisis, but its impact was insignificant for large firms during the crisis. These findings highlight the importance of IC for the profitability and growth of hospitality firms and suggest that different types of IC may have varying impacts on different aspects of sustainable performance and growth.
The results of this study have important implications for hospitality firms, policymakers, and investors. Specifically, our findings highlight the critical role of IC in shaping the sustainable performance and growth of hospitality firms during times of crisis. For instance, small firms may benefit from investing in human and structural intellectual capital to enhance their profitability. In contrast, large firms may need to focus on relational, intellectual capital to sustain their asset growth. Furthermore, the impact of IC may be influenced by external factors such as economic conditions and crises. Therefore, hospitality firms should focus on building and leveraging their IC to enhance their profitability and growth. This can be achieved through various strategies. First, for human capital, firms should prioritize employee training and development programs to enhance their skills and knowledge, which can positively impact their performance, and, ultimately, the firm’s profitability. Next, regarding structural capital, firms should focus on improving their operational efficiency and financial management, as shown by the negative impact of working capital growth on asset growth. By streamlining their processes and optimizing their use of resources, firms can improve their profitability and maintain their financial health. Finally, for relational capital, firms should prioritize building strong relationships with their customers and suppliers, as shown by the positive impact of operating revenue growth on profitability. Maintaining these relationships can help firms withstand economic downturns and maintain their competitive advantage. Hence, management must prioritize building and maintaining strong relationships with customers, suppliers, employees, and other stakeholders to maximize their overall performance. By doing so, hospitality firms can improve their ability to navigate challenges and achieve sustained success in a highly competitive industry. Policymakers can use these findings to design targeted policies and programs that support the development of intellectual capital in the hospitality sector. Additionally, investors can use this information to make informed decisions about where to allocate their resources by considering firms’ intellectual capital profiles.
The limitations of this study provide suggestions for future research. First, the study is limited to the European hospitality industry, so future research could expand the scope of the study to include other regions or industries to enhance the generalizability of the findings. Second, the study relies on secondary data sources. Future research could use primary data sources or a combination of primary and secondary data sources to generalize the findings of the study. Finally, the study does not take into account the specific characteristics and strategies of individual firms to examine the specific characteristics and strategies of individual firms and how they impact the relationship between IC and firm performance and growth.