Deter and Divert: How Incumbents’ Market Structures Guide Hotel Entry Strategies

Although location choice is fundamental in the hospitality industry, current research often overlooks the role of incumbent market structures in shaping these decisions. This study addresses this gap by examining how strategic entry barriers and brand loyalty influence new entrants’ market choices. Using data from 4,249 Texas hotels (2001–2023) and applying multi-level zero-inflated Poisson and hurdle gamma models, the analysis reveals that ownership consolidation limits the volume of entries and redirects potential entrants to nearby markets, while class heterogeneity surprisingly attracts more entrants. Moreover, strong brand loyalty deters independent hotels entirely and selectively discourages “loyalty beachheads,” although a higher concentration of parent companies may entice certain branded newcomers. These findings offer new insights into how incumbents can influence competitive dynamics and guide policymakers as they weigh the benefits of market consolidation against the need to foster a healthy, diverse hospitality sector.