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Purpose This paper aims to study the determinants of hotel performance, especially the role of location, in the Spanish hotel market. Design/methodology/approach The sample is composed of 1,034 hotels located in 97 tourist destinations in Spain during the period 2005-2011. The estimations were made by generalised least squares using panel data. Findings Overall, the results show that hotel attributes are the main determinant of performance. In particular, there is a minimum efficient scale in the hotel business. Location is the second most important determinant. This paper confirms that geographical location models, agglomeration models and competition models are relevant in the study of the effect of location on hotel performance. Regarding management practices, the performance is positively affected by good asset management. Practical implications Hotel managers can improve the total net revenue per available room by individually making decisions regarding its characteristics and management practices, especially size and asset efficiency. Moreover, they can collaborate with others (managers and policymakers) to manage tourist destination factors, particularly, demand level, accessibility, negative externalities and market concentration. Originality/value This research includes hotel characteristics, management practices and location as determinants of performance, by providing a broader framework of analysis than in previous studies. Regarding location, the empirical analysis considers simultaneously geographical location models, agglomeration models and competition models. The paper studies the Spanish hotel market, which is very important worldwide and which has heterogeneous tourist destinations, thereby making it a good context to analyse the relationship between location and performance.