Lodging firms’ exposure to ESG risk: Evidence from the US data between the years 2010–2024

This study examines the exposure of hotel firms’ stock returns to ESG (Environmental, Social, and Governance) risk as well as its determinants by analyzing data from the US lodging industry between the years 2010 and 2024. Based on recent literature suggesting that ESG may also be a non-diversifiable risk factor that is priced in the market, the current study examined the extent to which hotel firms are exposed to the ESG risk by using stock return data. The results indicate that lodging firms are probabilistically less exposed, but more exposed in terms of magnitude to the ESG risk than to the three Fama-French factors. Second-stage analysis of the ESG ‘betas’ further indicates that, among three ESG pillars, governance is the only dimension that significantly explains lodging firms’ exposure to the ESG risk. In addition, ESG exposure varies over time. Overall, the findings extend the literature in the field of hospitality management by showing that ESG may operate not only as a firm-specific attribute, but also as a conditional systematic risk factor for lodging firms. Implications and suggestions for future research are presented along with the findings of the study.