Rural lodging establishments: effects of location and internal resources and characteristics on room rates

Various different European rural development programs award significant funds to support a range of economic activities. In particular, rural lodging establishments have been key recipients of many development investments. Therefore, it is important for the public funding authorities to be able to identify the determinants of business success for these establishments, as a means of allocating their funds accordingly. One key strategic factor related to the success of rural lodging establishments concerns how these firms arrive at the prices they decide to charge and how the room rates they set may be influenced by their location and their internal resources and characteristics. The purpose of the present paper is to identify an explanatory model for the room rates set by Spanish rural lodging establishments. The explanatory factors identified are as follows: reinvestment in facilities; category of establishment; the level of experience of the owner-manager; and the extent of the firm's customer orientation adoption. It is also found that the location of the firm relative to its competitors and to touristic resources - such as forests, woodland or distinctive villages (that is, those with uniquely appealing features) - may also influence room rates. To carry out the study, a spatial model is used that takes into account the different characteristics of the tourism firm and its physical location, in terms of their effect on the room rates established. The findings have implications for academics researching this field as well for agencies and practitioners involved in the development of Spanish rural areas.