Impact of the location and market structure in the performance of hotel establishments

Abstract

Location is one of the most important determinants of hotels´ profitability. Consequently, because of the strategic nature of these decisions, business success depends heavily on a right choice. On the one hand, the location of a hotel in a particular tourism spot implies a potential level of demand as a result of occupancy and seasonality in that tourist spot. However, on the other hand there are less studied factors in previous literature relating to the competitive structure in the tourist spot. The methodology used in this paper shows that in explaining the profitability of the hotels as well as considering issues arising from unobserved heterogeneity should include other variables related to location. As the results show, in explaining hotel profitability is necessary to consider the competitive structure where the company operates.