Evaluating hotel productivity growth in Balearic and Canary islands

Abstract

This article examines the productivity of hotels operating in the two main sun and sand tourism markets in Spain, the Balearic, and the Canary Islands, from 2004 to 2013. In this manner, we can evaluate the impact of the global economic crisis on this sector. To tackle this issue, we apply alternative Malmquist productivity index decompositions to distinguish between different components of productivity. The results reveal that the economic downturn had major negative effects on hotel productivity for 2 years (2008 and 2009). After that period, hotels have increased their productivity levels driven by both technological and catching-up changes. This result provides new evidence supporting the fact that units operating in those destinations might avoid the process of decline predicted by Butler’s life cycle model.