Hotel Performance and Agglomeration of Tourist Districts

Abstract

This paper measures the impact on profitability of the geographical area where the vacation hotels of the Spanish Mediterranean are situated. It places a special emphasis on analysing the tourist districts existing in this coastal Spanish area and the extent to which the degree of business agglomeration at each destination affects hotel profit. Due to the characteristics of the service sector, and after a revision of the agglomeration literature, a ‘U’-shaped relationship is hypothesized between these two variables. With data of about 1869 hotels belonging to 113 tourist districts, results support the hypothesis and partially the theory of tourist districts.