Choice of location in the hotel industry

Abstract

The selection of a hotel site location has always been the result of conscious decisions, even though some lodgings may have had some more spontaneous beginnings. With the development of hotels and the hotel industry, some distinctive hotel types have evolved, which have had a direct impact on siting. The location to be selected for a new hotel depends largely on the type, character, quality category and the targeted guest groups. The paper aims to answer two main research questions. What models are available to study the location of hotels and how can they be applied? Which districts in a metropolis have proved to be the most favoured when choosing hotel locations?

The paper discusses the characteristics of the most frequent hotel types and their most favourite locations. The assessment of factors influencing location theory and investment decisions also provide useful practical help in this key decision which later cannot be changed but essentially determines the future success of the hotel. Some common or ‘generic’ location theories can be adapted for the siting choice of hotels. Apart from the models of hotel selection, the social, technological, environmental, political and legal factors influencing hotel investments, the real estate market situation in the area, and tourism considerations are important when fine-tuning an investment decision.

The academic literature lays out the features and applicability of essentially four hotel siting models: the mono-centric, the conurbation-based, the empirical and the operational model. The majority of the hotel industry in Budapest is located in a few central popular districts. The location theory applied for the leading Budapest hotels is the mono-centric model. A case study of Budapest outlines the geographic concentration of that part of the hotel industry which had developed until to 2016. It then analyses the location choice of new hotels that were opened between 2008 and 2016. The most successful districts were identified accordingly. The methods of analysis from this study can be effectively applied to feasibility studies and business plans in the hotel industry to determine the optimum location of a new hotel as part of the investment decision-making process.