International Modal choice determinants in the Spanish Hotel Sector

Hotel industry is a management intensive industry as well as a distinct real estate asset class. During the 80ís, a reduced number of hotel groups led the internationalization of the Spanish tourism industry. In the decade of the 90ís, the process of internationalization wraps to a growing and dynamic volume of hotel chains, acquiring an exponential growth. Spanish hotel firms have nearly one hundred thousand rooms outside their home nations in three hundred and forty six thousand properties at the end of 1999. This growth has been hurried by the imminent saturation of the national land, the spectacular generation of benefits experienced by the tourist industry and the globalization of the industry by the developing of international alliances between professionals and investors. Despite the growing ownership interest by direct equity investors in hotel real estate, the international expansion of hotel chains does not always imply the property of real estate assets. Interfirms collaborations are common in this new management landscape and control is only loosely correlated with ownership (Contractor & Kundu, 1998). What determines the optimum choice of organizational mode? Which factors lead Spanish hotel operators to invest in international real estate hotel assets? The present paper tests if accepting a syncretic approach as a conceptual framework (Contractor & Kundu, 1998), concepts derived from cost-transaction theory (Anderson & Gatignon, 1986; Buckley & Casson, 1998), agency theory (Shane, 1996) and organizational capabilities perspective (Teece, 1987; Winter, 1987), are able to explain the modes of entry of the Spanish hotel industry to foreign markets (Figure 1). Within this aim a model ordinal Logit analysis, technique used in numerous previous studies related to the modal choice of entry in foreign environments (Gatignon & Anderson, 1988; Kogut & Singh 1988; Trepstra & Yu, 1988; Erramilli, 1991; Fladmoe-Linquist, 1995; Contractor & Kundu, 1998), is considered. The data sustaining this study come from a field work carried out during the year 1999, consistent basically in interviews in depth with the international managers of the Spanish hotel chains with presence in more than one country and then, filling in a questionnaire. This study covers 100% of franchised properties, 90,8% of total management contracts outside Spain, 85,7% of joint-venture properties and 98,5% of fully owned properties. The choice of entry mode is shown to be determined by both country or environmental variables as well as firm-specific variables. The results show that wholly property investment is more common in low political, economic and financial risk countries, with high GDP per capita. Cultural similarities with the home country also influence the investment decision. The mechanism whereby each firm may exercise control over the foreign business determines as well the kind of investment chosen. The results of the study allow us to confirm the applicability of the syncretic theory to the modality of entry of the Spanish hotel industry to foreign destinations. On the other hand our conclusions show that the main differences on entry mode choice between the Spanish hotel firms and the international hotel industry, make reference to dissimilarities on the stage of internationalization and the vacacional orientation of the Spanish hotel firm.