Determinants of TRevPAR: hotel, management and tourist destination

Abstract

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.

Profitability in the hotel sector: a PLS approach

“…For example, some studies focus on the characteristics of the hotel (Aissa and Goaied, 2016), in its spatial positioning with respect to CBD or transport nodes (Lado-Sestayo et al , 2016; Urtasun and Gutiérrez, 2006) or in the characteristics of the tourist destination (Kozak and Rimmington, 1998; Lado-Sestayo et al , 2017). As Lado-Sestayo et al (2017) highlight, this divergence of approximations can be explained by the coexistence of different theoretical approaches regarding the same latent variable, profitability. First, some studies focus on the hotel resources and capabilities theoretical perspective (Phillips, 1999).…”

“…First, some studies focus on the hotel resources and capabilities theoretical perspective (Phillips, 1999). Second, other studies focus on the theoretical framework of urban location models (Yang et al , 2014; Lado-Sestayo et al , 2017). Third, some papers consider the theoretical competition models established by the structure-conduct-performance (SCP) and the Chicago School (Mason, 1939, 1949; Bain, 1951, 1956; Demsetz, 1973; Williamson, 1975).…”

“…Therefore, its study is one of the main research areas in the academic literature (Vivel-Búa et al , 2018). From a theoretical perspective, different approaches have been considered, contributing to establish heterogeneous theoretical frameworks regarding main performance determinants (Lado-Sestayo et al , 2017; Sainaghi, 2011). Hotel characteristics, hotel location, the competitive environment and the characteristics of the tourist destination can summarize the main profitability determinants identified in previous literature (Lado-Sestayo et al , 2017).…”

“…Regarding the tourist destination, the occupancy rate and the level of seasonality are considered. Thus, the eclectic theoretical model jointly evaluates the frameworks to the study of hotel profitability identified in the previous literature (Lado-Sestayo et al , 2017; Yang et al , 2014).…”

“…In this respect, the previous studies present a partial view that omits relevant aspects to explain hotel profitability. According to Lado-Sestayo et al (2017) hotel location models are complementary in explaining hotel performance. However, previous studies focus on one single model (Sainaghi, 2011; Pan, 2005) Second, it contributes to the dissemination of PLS in the hotel sector (Ali et al , 2018), which is especially useful when the assumptions required by Covariance Based Structural Equation Modelling are not met.…”