RISK MANAGEMENT STRATEGIES AND ORGANIZATIONAL PERFORMANCE OF CLASSIFIED HOTELS IN NAIROBI CITY COUNTY, KENYA

Abstract

Risk is an immanent characteristic of all economic processes. The hotel industry in Kenya faces multiple risks and every vacant or cancelled room affects the performance of a hotel. Because of this susceptibility, there is need for hotel managers to adopt effective strategies to manage the consequences. This study determined the effect of risk management strategies on performance of classified hotels in Nairobi City County in Kenya. The specific objectives of study were: to determine the effect of risk avoidance strategies on performance of classified hotels in Nairobi City County, to evaluate the effect of risk reduction strategies on performance of classified hotels in Nairobi City County, to assess the effect of risk retention strategies on performance of classified hotels in Nairobi City County, and; to evaluate the effects of transfer management strategies on performance of classified hotels in Nairobi City County. The study was based on the resource based theory, prospect and modern portfolio theories. The study adopted a cross-sectional research design. The target population comprised of 50 classified hotels operating in Nairobi City County and as classified as at the year, 2023. The study employed a census sampling method. Both primary and secondary data were used. Primary data was collected using structured questionnaires. Secondary data was obtained through document analysis from official records obtained from the hotel. The study used both descriptive and inferential statistics. Pilot study was conducted in Kisumu's 10 classified hotels since these establishments face significant challenges with low return on investments. The study results indicated that risk management strategies explains 62.7% of variations on organizational performance of classified hotels in Nairobi City County. The regression results of the study: indicated that risk avoidance strategies had a positive and statistically significant effect on organizational performance of classified hotels. This is supported by regression coefficient of 0.558 and p-value 0.001. Risk reduction strategies was found to have a positive and statistically significant effect on organizational performance of classified hotels. This is supported by regression coefficient of 0.687 and p-value 0.021. Risk retention strategies was found to have a positive and statistically significant effect on organizational performance of classified hotels. This is supported by regression coefficient of 0.792 and p-value 0.001. Finally, risk transfer strategies were found to have a positive and statistically significant effect on organizational performance of classified hotels. This is supported by regression coefficient of 0.459 and p-value 0.000. The study, is geared towards equipping classified hotel’s management on choice of risk management strategies. The study may also inform the development of effective risk frameworks to enable hotels identify and mitigate potential risks before they escalate into larger problems. The study makes appropriate contribution to the hospitality industry by proposing the best suited risk management strategies on performance in hotels in Kenya, regionally and globally. Further, the study serves as a reference for future researchers and scholars in strategic management.