Equity financing and performance of hotels in Wakiso district: A case study of Lake Victoria Hotel, Entebbe, Uganda

Abstract

The study was about “Equity Financing and Performance of Hotels in Wakiso District, using Lake Victoria Hotel as a case study. It was guided by the following objectives; i. To examine the extent to which savings contribute to business growth and expansion. ii. To establish how retained earnings contribute to increased profitability. iii. To establish how sale of current and fixed assets ensure improved services. The case study strategy that used both quantitative and qualitative approaches were adopted. The study population of 100 and a sample size of 80 respondents (based the Sloven’s formula) was used. However only 75 respondents filled in and returned the questionnaires making a response rate of 92%. Census, purposive and simple random sampling methods were used to select the sample. Self-administered questionnaire and interviews guide and documentary review were the main data collection instruments. The study findings reveal that, savings contribute to business growth making owners take control of business stock and making them gain access to other development opportunities and it also revealed that savings are irrelevant as far as making independent decisions is concerned. The study also revealed that retained earnings facilitate planning for the future, it is an indication of the progress of the business. The study also found out that sale of fixed and current assets leads to quality services, makes funds available, enhances liquidity, encourages business effectiveness and efficiency and improves on production. In conclusion, the study found out that equity financing contributes 61% to the performance of Lake Victoria Hotel. The study adopted the convectional 0.05 level of significance. The P values for the area under the normal curve with Z score of 2.2 was 0.028 which is less than 0.05 which means that the null hypothesis was rejected and therefore, there was a significance relationship between equity financing and performance of Lake Victoria Hotel. The study recommended that, Hotel owners should get ways of improving saving since the available is not enough and this can be done by engaging other consultants in decision making regarding the saving strategies and this will help them make important decisions which will make hotel to improve on the savings culture. Hotel owners should get other income generating activities so as to increase on their retained earnings, savings and income from their assets. This can be done by adopting the business diversification strategy and that will open up other sources of capital hence increasing on their equity financing. Other means of seeking contributions from friends and families will help them to increase on their capital base. Other areas for further research in respect of Equity financing and promotion and internal financing and the economic growth of Hotel in Uganda; as well as Debt financing and performance of small scale businesses in Uganda, are recommended, finally the pecking order theory that guided the study should be adopted and used for equity and performance of hotels in Uganda, especially Lake Victoria Hotel