Domestic tourism and the resilience of hotel demand

Highlights

• We study the short-term resilience of domestic tourism demand in Spain amid COVID-19.

• A novel panel regression clustering approach is implemented.

• Provinces with greater pre-pandemic domestic demand have resisted better the shock.

Abstract

This paper analyses the short-term resilience of domestic tourism demand in Spain to COVID-19 during the re-opening of the economy. We study the factors that explain the immediately-after pandemic outbreak resilience of the hotel industry focusing on the role of (i) price variations, (ii) pre-pandemic demand levels of domestic and international tourism, (iii) the epidemiological situation at each destination and potential origins, and (iv) non-pharmaceutical interventions in the form of regional borders' closure. Exploiting monthly panel data for 50 provinces, we implement a panel regression clustering approach to examine slope heterogeneity in the determinants of domestic hotel demand resilience. Our results indicate that provinces with greater pre-pandemic demand have resisted better the pandemic shock, but with relevant heterogeneity across clusters.