The Effect of Tourism Clusters on U.S. Hotel Performance

Abstract

A cluster is a geographical concentration of interrelated firms. Cluster theory states that the synergies created inside the cluster (by the interactions between firms that compete and those that collaborate) enhance the productivity and innovation of firms and therefore their economic performance. While manufacturing industries have been widely studied from the clustering perspective, service clusters and specifically touristic clusters have received less attention. In this paper, we identify U.S. touristic clusters using a concentration measure, the Location Quotient. Then we check whether hotels located in touristic clusters obtain higher economic results than those hotels located in areas where the level of touristic-related business concentration does not get the critical mass to consider it a cluster (instead of reducing their benefits due to the high level of competitors nearby). Our results find significant differences between the two sets of hotels. The effect is stronger for subsegments of hotels based on their star category, location, and management structure. Specifically, we demonstrate that the differences are more pronounced within luxury and upscale hotel categories and within chain-managed hotels. The differences are less important in resort and airport locations than in small-metro/town, urban, and suburban areas. These results have important location implications for managers. They also contribute to understanding that economies of agglomeration lead to benefits from being located closely and in highly concentrated industries. But there is still a lot of research needed to better understand the relations between cooperation and competition within touristic clusters and how these enhance the economic performance of hotels.