The financial and economic performance of hotels in spanish beach tourist destinations

Spain is the third country in the world ranking in terms of international tourist arrivals, the tourism sector is one of the main contributors to the GDP and in the aftermath of the 2008 financial crisis it has been one of the few sectors capable of creating employment. Most tourists visiting Spain choose sun and beach destinations and most of them decide to stay in hotels. This paper analyzes the differences in financial structure, size and profitability of hotels located in three main Spanish coastal areas: the Costa Brava, the Costa Dorada and the Costa del Sol. The study focuses on the analysis of the financial statements of a sample of almost a hundred hotels, finding key differences in hotels' performance in these three relevant clusters of the hospitality industry. Our conclusion is that the three areas show significant differences in terms of size, financial structure and economic performance. Hotels located in Costa del Sol are much bigger than the hotels located in the other areas but this also implies higher levels of debt and accordingly higher interest payments with a negative effect on the profits level. Hotels in Costa Dorada have a size that allows benefiting from economies of scale, with reasonable interest payments, this size combined with a higher occupancy rates are the main reasons for the better economic performance of this area compared with the other two. Finally one of the main conclusions of this paper is the existence of exit barriers due to the specificity of the assets involved in the hotel sector.