A study of hotel development between 1985 and 2017 shows tendency to cluster in specific geographical regions.
Location is key to the success and overall growth of any business over time because this generally dictates the types of business operations and customer accessibility.
A hotel also does business under demand uncertainty while its relocation cost is extremely high. For that reason, hotel location becomes a strong source of strategic competitiveness that influences a company’s overall strategy.
Hotel location is not randomly or equally distributed. Rather, it is differentially developed in certain geographical areas. For instance, a hotel in an urban area might be developed as one of the key pieces of infrastructure and linked to other various economic activities, including cultural and natural attractions, services, transportation, commerce and business.
It is important to examine their concentration in certain regions and their disparity across regions over time because the findings can provide important implications not only for the growth of the hotel industry itself, but also for the role of the hotel industry in relation with regional economic development.
This study examined the spatial clustering patterns of the American hotel industry that has differentially developed in certain regions over time, using STR hotel census data, which collected the most complete profile of hotels in the U.S. since June 1985, including key information, such as hotel location, room count, amenities and opening dates. The census data samples comprise approximately 60% of all lodging properties, about 70% of the rooms, and nearly 90% of room revenues in the U.S. lodging industry. Each piece of hotel data was converted into county data for this analysis. Based on opening dates and room counts, the study traced on how hotels developed and where from 1985 to 2017. (Editor’s note: STR is parent company of Hotel News Now.)
The temporal growth of the hotel industry in the U.S. was examined in the spatial context. Figure 1 shows that by 1995, the majority of hotels had differentially developed in the southwestern region of the country, in the metropolitan cities of San Francisco, Los Angeles and Las Vegas; and in the northeastern region, in the metropolitan cities of New York; Philadelphia; Washington, D.C.; Baltimore; and Boston. Several metropolitan areas centered on the cities of Chicago and Miami also had a higher density of hotel development. By 2010, the distribution of the hotel industry exhibited similar patterns as previous ones with emergence in new areas, as highlighted in the cities of Houston, San Antonio, Dallas, Atlanta and Denver. Overall, the location of the American hotel industry differentially developed in regions, particularly urban areas, while there has been gradual diffusion to neighboring counties from the concentrated areas.
As displayed in Table 1, the top 30 counties in number of hotels were examined over time. From 1985 to 1995, the counties with the highest number of hotels were Los Angeles, Orange, San Diego, Riverside, San Bernardino, Santa Clara and Alameda in California; and Dallas, Harris, Bexar and Tarrant in Texas. These counties are the most densely populated areas, with an affluence of tourism and recreation attractions. In addition, Orange (Florida), Cook (Illinois), Maricopa (Arizona), and Clark (Nevada) counties were areas centered on metropolitan cities (i.e., Orlando, Chicago, Phoenix and Las Vegas, respectively).
From 1996 to 2006, the majority of these counties still possessed a high number of hotels. However, the increasing intensity of hotels led to newly ranked counties, such as Travis (Texas), Gwinnett (Georgia), New York (New York), Wake (North Carolina), Orleans (California), Oklahoma (Oklahoma), Hillsborough and Broward (Florida). These counties also appeared the most densely populated areas in the states.
The previously identified counties were similarly ranked from 2007 to 2017. However, new counties appeared in the top 30, including Bexar (Texas), Queens (New York), Dade (Florida), Allegheny (Pennsylvania), Hudson (New Jersey), Collin (Texas), Tulsa (Oklahoma), Hennepin (Minnesota) and Salt Lake (Utah). The top five counties from 1985 to 2017 consist of Harris (Texas), Los Angeles (California), Maricopa (Arizona), Dallas and Bexar (Texas).
In addition, the market share percentage of the top 30 counties in the U.S. was 19.5% in 1995 and 19.2% in 2017. Although the market share percentage was relatively unchanged over time, the top 30 counties out of 3,111 counties still command a high portion of the total market, which means a highly unequal distribution.
Hotel locations were concentrated in certain areas in a clustered manner from 1985 to 2017. In other words, many hotel properties were developed with clustering in specific geographical regions over time.
In conclusion, U.S. hotels have differentially developed by concentrating in the metropolitan cities of San Francisco, Los Angeles, Las Vegas, New York, Philadelphia, Washington, D.C., Baltimore, Boston, Chicago and Miami, with strong spatial-inertia holding.
The results also indicate that these regions have continued growing since 1985.
The implications are relevant for government planners and policymakers as well as stakeholders’ property investment decision-makers.
First, hotels are struggling in terms of demand sensitivity and high fixed costs, so hotels must be located in a region where they can minimize business risk in demand while maximizing business opportunities derived from locational advantages.
Spatially differential concentration in urban areas seems to be the practical response to the nature of the hotel industry despite high competition. The spatial concentration seems to be due to customers, supply networks, workers, transport links and infrastructure for the lodging business.
Second, government planners and policymakers should have better understanding of the hotel industry as part of the regional development strategy while hotel investors can utilize information to find business potential and opportunities at the regional level. Furthermore, considering positive spatial spillover effects in the hotel industry can help enable collaborative efforts with neighboring regions.
Young-Rae Kim, Ph.D., is an associate professor in the department of business administration at Ider University & Royal International University in Ulaanbaatar, Mongolia. His research interests are tourism and hospitality industry analytics, tourism development and policy, and sustainable tourism destination management.
Jin-Won Kim, Ph.D., is an assistant professor in the department of tourism, recreation and sport management at the University of Florida. His research interests are applications of GIS and spatial technologies in tourism and recreation planning, development and management, water-based recreation and tourism planning and development, and public health and policy.
Chang Huh, Ph.D., is a professor at the College of Hospitality and Tourism Management at Niagara University. His research interests include hospitality marketing strategy and hotel market analytical methods.
The assertions expressed in this article do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please feel free to comment or contact an editor with any questions or concerns.