Risk determinants in the hotel sector: Risk credit in MSMEs

This paper analyses the determinants of credit risk in the Spanish hotel sector, employing panel data models covering a sample of 734 micro, small and medium-sized enterprises (MSMEs) over the period 2005-2011. Among other things, this study is relevant because credit risk is an important variable for several stakeholders. However, the existing literature has neglected the role of location as a determinant of credit risk and has focused on hotel characteristics. This paper analyses both types of variable simultaneously. Overall, the results highlight the importance of the hotel's location as a determinant of its credit risk. Specifically, seasonality, the level of market concentration and the distance to the tourist destination centre have a significant impact on the financial stability of the hotel. Other factors related to hotel characteristics that prove significant are diversification, liquidity, indebtedness, operational efficiency and profitability.