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Which hotels benefit from locating next to competitors? In this study of 14,995 hotels we provide evidence of both a price benefit and a detriment for specific hotels that co-locate next to other hotels. Relying on the theoretical framework of agglomeration economics, the results reveal that hotels that co-locate in the same geographic cluster with the highest quality segmented firms (luxury hotels) accrue a price premium compared to competitors in markets with larger proportions of lower-segmented competitors. The strongest price premiums were obtained by midscale hotels without food and beverage in clusters with large proportions of luxury and upscale hotels. Similarly, high-end hotels that pursue differentiation strategies experience price erosion when they are in the same geographic location as lower-end hotels. Luxury hotels experienced the greatest price erosion when they operate in locations with large proportions of economy and midscale hotels. The paper concludes with a discussion of the implications of these findings for competitive dynamics and hotel location decisions.


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© Taylor & Francis. Final version published as: Enz, C. A., Canina, L., & Liu, Z. (2008). Competitive dynamics and pricing behavior in US hotels: The role of co-location. Scandanavian Journal of Hospitality and Tourism, 8(3), 230-250. Reprinted with permission. All rights reserved.