The Impact of Exchange Rate Volatility on Hospitality Industry ? A Study in Lusaka Province of Zambia

The purpose of this study was to find out the impact of exchange rate volatility on hospitality industry in the Lusaka Province of Zambia. This research aimed to find out the impact of exchange rate volatility on profitability, capacity utilization and the impact of GDP and inflation on profitability of hospitality industry. The study used quarterly secondary data from 2005 to 2015 with respect to three big hotels which had international branding and received over fifty percent revenue in forex. The multiple regression model was used to measure the impact of independent variables on the dependent variable. The study revealed that volatility in exchange rate had significant effect on profitability. But inflation had negative effect on profitability. The GDP growth rate had positive effect on the capacity utilization. The study concluded that the Central Bank of Zambia should take necessary steps to increase the value of domestic currency, i.e., Kwacha, and stop fluctuations in it to safeguard the profitability in the hospitality industry. The study also concluded that through appropriate monetary policy, i.e., increasing the bank rate and reserve ratio and selling the bonds in the market, the inflation could be reduced by controlling money supply.