The impact of hotel openings on the commercial structure: Evidence from a natural experiment

Abstract

Hotels and tourist-oriented businesses geographically coagglomerate in urban areas, suggesting that hotels affect the commercial structure around them. Yet, previous evidence is correlational and cannot establish if hotel openings can trigger a tourist-oriented commercial transformation. This paper proposes to fill this gap by using a natural experiment. At the end of 2015, the issuance of licenses for new hotels was suspended in Barcelona, heterogeneously impacting 70 properties in the pipeline. Those projects that had obtained all the required permits when the ban was imposed could still open, while the rest were stopped. Accordingly, employing data from different commercial census waves and a difference-in-differences strategy, changes in the commercial structure around addresses where hotels were permitted to those where they were not are compared. The results show that, on average, hotel openings positively impacted the appearance of new tourist-oriented businesses. Nevertheless, this transformative power was limited in magnitude and geographical scope.