Loss of profit in the hotel industry of the United States due to climate change

Abstract

Tourism has been identified as a key economic sector vulnerable to climate change, yet direct empirical evidence is still lacking on the economic gain and loss of the tourism industry due to climate change. Here we find that temperature significantly affects the profits of the hotel industry with both spatial and seasonal heterogeneity. By using a rich dataset of the monthly financial records of more than 1700 hotels in 50 US states during 2016-2018 (approximately 3.2% of hotels nationally), we show that a deviation from 18 C ∼ 20 C in monthly averaged temperature leads to a decrease in the profit rate. The effect is triggered by fewer customers, less revenue, and higher cost per occupied room partially due to the increased usage of electricity and water. Such an effect can be lasting and is less impactful for higher chain scale hotels. In future GHG emission scenarios, climate change will lead to a loss of profit in most climate zones particularly the southern regions, with higher GHG emissions leading to a more serious effect. This study contributes to the literature on how climate change affects human activities and helps refine the relevant damage function of climate change on tourism in existing climate models.