Chapter 6
Locating the offer
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Identify the main classes of hospitality locations
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Research the characteristics of potential sites using
relevant criteria
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Evaluate the components of a destination’s image
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Understand how hospitality companies work with
destination marketing organizations
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Location has a critical influence on the selection of
target markets and on potential demand
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Finding suitable location(s) is a prerequisite for
managing a profitable hospitality company
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The famous quotation attributed to Conrad Hilton,
who defined the three most important factors for
success in the hotel business as ‘location, location,
location’ remains valid today
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For owners, location choices have major capital
investment and long term consequences
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When the agreement to buy a site or rent premises is
finalized, it is difficult and costly to change the
decision – the location is fixed
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An appropriate site will have the necessary
characteristics to ensure strong demand for the
product concept
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Theory of location strategy has primarily been developed
for multiple retail shopping outlets; however, the principles
are applicable to hospitality operations
Multiple-site hospitality operators have dramatically
expanded their network of outlets in the recent past and
plan to continue to expand
This expansion is driven by the need to:
 grow the business (sales and profits) to satisfy
shareholders’ expectations
 locate where customers need to stay or dine
 be where competitors are located
If your brand is not located where your customer wants to
stay or dine, then you might lose that customer forever to
one of your competitors
There are three options for network expansion:
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Acquisition – companies buy a group of hotels (or restaurants), and/or
independent hotels, and re-brand these properties. This is the most
convenient, proven and popular approach; however, there often are
issues of ensuring brand conformity between the newly acquired
properties and the company’s international brand standards
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Conversion – companies buy an existing property (e.g. an office block,
high-rise flats or warehouse) and convert the property into hotel (or
restaurant) premises. This is much more time-consuming and expensive.
Softer hotel and restaurant brands with more flexible approaches to brand
standards can convert premises more easily than harder hospitality brands

New-build development – companies purchase land and build their own
property to their own design specifications or to the design brief of the
designated brand (subject to planning controls). For hotels, this can be
more time-consuming than acquisition, but the advantage is that the
brand standards are delivered from the moment the property opens. For
fast-food operations, a common option is to acquire a site and erect a
purpose-built unit constructed from modular components
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Each hospitality unit’s location possesses a bundle of
attraction and deterrence factors, which determines the
flow of customers to the property – and the potential
demand
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Attraction factors might include a large number of business
and retail facilities in the area
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Deterrence factors might include travel times and
inadequate local transportation
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The balance of attraction and deterrence factors accounts
for variance in customer flows to different hospitality sites
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Capital city
Provincial city
Gateway
Highway
Resort
Rural
Honey-pot
The three levels of spatial analysis in researching locations are:

Market selection – decisions analyse the geo-demographic
and socio-economic characteristics of a geographic region
or country; including the current situation, examining
trends and projecting future conditions
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Area analysis – focuses on the characteristics of specific
local areas within a region

Site evaluation – examines local demographics, traffic flow
and accessibility, individual competitors and the
attractiveness of specific sites
Evaluation of market attractiveness uses demand analysis and
competition analysis. Key data includes:
 visitor arrivals, visitor mix (by country) and visitor
spend
 host population and demographic statistics
 economic statistics
 hospitality industry operating performance
benchmarks
The attractiveness of a market will depend on the potential
demand from the selected target markets and the intensity of
competitor rivalry
Figure 6.1 A typical example of the data used in a European
development strategy for a major international hotel group
Sites can be categorized as follows:
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P rime – these sites are the best locations. They are in high demand and
can be difficult to acquire (because most are already in the hands of
existing operators), and expensive to maintain
Secondary – these sites are not prominent but are still reasonably
accessible. Most hospitality units are in this category
Tertiary – these sites are less accessible and may have other deterrence
factors, for example, being close to a truck stop or an industrial estate
Factors influencing individual site selection include the following:
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local demographics and the characteristics of neighbourhoods
accessibility, pedestrian and vehicle traffic flows and car parking
Competitors: the number, size, quality, prices and occupancy of branded
and local competitors provide an insight into the local marketplace
individual site characteristics, which include the size, landscape, adjacent
buildings, aspect (south or north facing)
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Location decision theory assumes a high element of
rational decision-making, but historically, hospitality
companies have expanded opportunistically

The hospitality brands with multiple units and growth
strategies use computerized attraction/deterrence
models to aid location decisions
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Despite all the research, some location decisions are
based on ‘gut feelings’ and instinct – especially
independent operator’s decisions
Destinations are complex products because they:
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exist across a wide spectrum of different geographic levels –
continents, countries, regions, cities
have layers of administrative bodies responsible for the development
and promotion of tourism, and roles and responsibilities can be
confused, diffused and, in some cases, duplicated
comprise physical characteristics (the natural landscape and climate),
which obviously cannot be changed in the built environment
present deep-rooted cultural and historical heritages, which influence
the character of local peoples and the visitor experience
incorporate all the components of the tourism product – hospitality
operations, transport, travel, intermediaries, attractions
and there is no single owner of the tourism product
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The image of a destination is a crucial component in
today’s competitive tourism market
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A destination’s image is a mixture of the following:
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inherited physical attributes
the built environment
the cultural and historical heritage
myth
the people
Destination marketing organizations (DMOs) can be
Government funded, a private company or a combination of
the public and private sectors. Their primary role is to:
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carry out marketing research and provide market intelligence
for stakeholders
monitor visitor statistics and trends
coordinate marketing campaigns and in particular
promotional activity
build and maintain destination websites
liaise with intermediaries
provide tourist information for visitors before and during visits
manage the brand image of the destination
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Location decisions are a major investment with long-term
consequences
Thorough research needs to be undertaken to evaluate the potential
demand and competition in a location
Major hospitality companies will use computerized models to
evaluate site selection decisions, whereas entrepreneurs may use
their ‘gut instinct’ to choose an appropriate site
The three levels of spatial analysis in researching locations are:
geographic market selection, area analysis and site evaluation
There are a wide range of criteria used by hospitality companies to
evaluate the market potential of locations
Tourism destinations can be categorized under the headings: capital
city, provincial city, gateway, highway, resort, rural and honey-pot
Destinations are complex products with a host of public and private
stakeholders
Destination image has a major impact on tourist destination selection
Hospitality organizations work with DMOs to market the destination
effectively
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Butler, R. W. (1980). ‘The concept of a tourist area cycle of
evolution: implications for the management of resources’.
Canadian Geographer, 24, pp. 5–12.
Ghosh, A. and McLafferty, F. L. (1987). Location Strategies
for Retail and Service Firms. Lexington Books.
Heizer, J. and Render, B. (2008). Operations Management.
Pearson Prentice Hall.
Jones, P. (1999). ‘Multi-unit management in the hospitality
industry: a late twentieth century phenomenon’.
International Journal of Contemporary Hospitality
Management, 11 (4) , pp.155–164.
Middleton, V. T. C. and Clark, J. (2001). Marketing in Travel
and Tourism. Butterworth-Heinemann.