3 International Tourism Research and Concepts

Peter Keller /
Thomas Bieger ( EDS .)

Real Estate and

Destination Development
in Tourism
Successful Strategies and Instruments

International Association of Scientific Experts in Tourism (AIEST)

ES
erich schmidt verl ag
 International
Tourism Research
and Concepts

Volume 3
 Real Estate and
Destination Development
in Tourism
Successful Strategies and Instruments

Edited by
Professor Dr. Peter Keller
Professor Dr. Thomas Bieger

With Contributions by
Prof. Dr. Otto Bammer · Dr. Pietro Beritelli · Matthias Beyer ·
Prof. Dr. Thomas Bieger · Prof. Dr. Philipp E. Boksberger ·
Prof. Dr. Manat Chaisawat · Lara Cinesi · Prof. Dr. Giovanni Danielli ·
Jordi Datzira-Masip · Raf de Bruyn · Isabelle Engeler · Dr. Jörg Frehse ·
Prof. Dr. Frank M. Go · Patrick Hainzl · Marcus Herntrei ·
Prof. Dr. Hubert Job · Marco Julià-Eggert · Prof. Dr. Peter Keller ·
Lisa Kofink · Prof. Dr. Raija Komppula · Prof. Dr. Christian Laesser ·
Mia Lammens · Prof. Dr. Dagmar Lund-Durlacher ·
Prof. Dr. Andrea Macchiavelli · Prof. Dr. Rico Maggi · Prof. Michael Mair ·
Xavier Matteucci · Daniel Metzler · Prof. Dr. Harald Pechlaner ·
Helen Reijonen · Dr. Giovanni Ruggieri · Dr. Miriam Scaglione ·
Claudia Scholz · Dr. Markus R. Schuckert · Prof. Dr. Hubert Siller ·
Prof. Dr. Jürg Stettler · Marc Stickdorn · Tuomas Timonen ·
Oraphan Tungsomboon · Dr. Serena Volo · Daniela Wagner ·
Prof. Dr. Klaus Weiermair · Robert Weinert ·
Dr. Anita Zehrer

E R I C H S C H M I DT V ERLAG
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Table of Contents

Peter Keller, Thomas Bieger

Introduction .......................................................................................................... 1

Section 1:
The Role, Structure and Development of Destination Real Estate Markets

Jordi Datzira-Masip, Marco Julià-Eggert

Spain and Croatia: Traditional versus new markets for residential tourism ........ 11

Harald Pechlaner, Lisa Kofink, Marcus Herntrei

Hotel resorts in South Tyrol: Drivers and constraints for a real estate-based
development ......................................................................................................... 25

Manat Chaisawat, Oraphan Tungsomboon

Real estate market for long stay tourists and expatriates in Phuket..................... 45

Section 2:
Evolving Destination Market Business Models

Andrea Macchiavelli, Lara Cinesi

Low cost tourism and real estate demand ............................................................ 63

Miriam Scaglione
Dynamics of price negotiation in real estate at upscale resorts in the Alps –
A case study of Verbier, Valais, Switzerland....................................................... 79

Rico Maggi, Claudia Scholz

A perspective on beauty – Reading urban attractiveness via content analysis
of photographs...................................................................................................... 97

Section 3:
The Socio-Economic Impacts of Real Estate on Destinations

Giovanni Ruggieri
The economic impact of tourism in private homes: The case of the Lipari
Archipelago .......................................................................................................... 121

V
Table of Contents

Otto Bammer, Patrick Hainzl, Michael Mair, Daniela Wagner

Developments in real estate and tourism in Alpine winter sports destinations:
The case of the Styrian ski resort Schladming ..................................................... 131

Xavier Matteucci, Dagmar Lund-Durlacher, Matthias Beyer

The socio-economic and environmental impacts of second home tourism:
The South Pacific Coast of Nicaragua Example .................................................. 149

Section 4:
Optimizing Destination Capacity through Real Estate Management
Strategies

Mia Lammens, Raf de Bruyn, Frank Go

A conceptual design of public measures: The case of the Flemish holiday
property market .................................................................................................... 165

Anita Zehrer, Hubert Siller, Marc Stickdorn

Second homes and sustainable development – A perception analysis of second
homes in Kitzbühel, Austria................................................................................. 179

Serena Volo
Real estate supply and demand issues in a seaside destination............................ 193

Section 5:
Real Estate Strategies for Destinations

Klaus Weiermair, Jörg Frehse

Real estate private equity investment and its impacts on the business
development strategy of international hotel companies in European tourism
destinations........................................................................................................... 217

Markus R. Schuckert, Philipp E. Boksberger

Development of destinations and real estate in a tourism region –
An application of life cycle theory....................................................................... 233

Jürg Stettler, Giovanni Danielli

Image, truth and illusion in tourism promotion: The problem of the rapid
spread of second homes in Switzerland and planning strategies ......................... 249

VI
 Table of Contents

Section 6:
Public-Private Governance Approaches for Managing Holiday Property
Market Development

Daniel Metzler, Hubert Job

Embedding leisure facilities in destination development – Two case studies of
water parks in Germany ....................................................................................... 269

Raija Komppula, Helen Reijonen, Tuomas Timonen

Vacation home owner’s willingness to lease through an intermediary –
A case study in two Finnish ski resorts ................................................................ 285

Pietro Beritelli, Isabelle Engeler, Christian Laesser, Robert Weinert

Estimating renting behaviour of second home owners – The case of Swiss
Alpine destinations ............................................................................................... 301

List of Authors ..................................................................................................... 313

VII
 Real estate market: Impacts on tourism destinations

Introduction

Peter Keller & Thomas Bieger

1 Strategic issues
The International Association of Scientific Experts in Tourism (AIEST) is a
worldwide network of researchers which at its annual conferences discusses fun-
damentals and concepts for achieving growth and competitiveness in tourism. The
third publication in the new series “International Tourism Research and Concepts”
is devoted to the analysis of the booming real estate market and its impacts on des-
tinations. Scientific contributions selected for their methodical relevance and the
practical solutions they offer highlight the new dynamic of residential tourism in
destinations and resorts.

For some years now there has been a genuine boom in the holiday property market.
Residential tourism demand is growing despite the present turbulence in the real es-
tate and financial markets, and is rapidly becoming internationalised. Amenity Mi-
gration, Search for Trophy homes and speculation are important drivers for the de-
velopment of tourism and leisure property market. Entrepreneurs in the property
market are investing in the best sites, in both new and traditional destinations. They
have developed new business models designed to make the acquisition of property
as attractive as possible.

At its best, this growth facilitates the creation of new tourism centres and revitalises
the often rigid and poorly-used structures of existing tourism regions. At its worst,
it leads to empty beds in the traditional accommodation sector, reduces the attrac-
tiveness of destinations, and produces eyesores for the local population. A rela-
tively high share of second homes in a destination is often considered as an indica-
tor that their positive impacts on the product cycle are being lost, and of the
beginning of decline.

1
Peter Keller, Thomas Bieger

The contributions selected here address the reasons for investing and for acquiring
real estate in destinations. They show how hybrid forms of accommodation could
satisfy new customer needs better and ensure a profitable supply and use of proper-
ties. It is discussed how rigid traditional accommodation structures can be im-
proved and what kind of measures could overcome the so-called “cold beds” prob-
lem. Finally, the articles focus on possible ways of maximising the benefits to be
derived from new forms of accommodation in the destination, while minimising the
negative, socio-economic aspects resulting from the inefficient use of infrastructure
and high operational costs.

2 New dynamics of residential tourism and the destination real estate

market
Holidays taken in properties which are owned or rented are considered as residen-
tial tourism. This traditional form of tourism results from a demand for the kind of
accommodation that allows flexible use and a free choice of services. The analysis
of the development of tourism destinations shows that residential tourism depends
essentially on the stage of development of the local economy. Countries which
open themselves to the world market become wealthier. The increase in household
budgets makes tourism more popular. Wealthier households can afford to buy sec-
ond homes. The larger part of the population needs affordable accommodation,
which apartments without services can offer.

These two existing models of the development of residential tourism are to some
extent linked to the domestic markets in traditional tourism countries. The tradi-
tional markets for these forms of accommodation now overlap with new demand
trends, such as the need for luxury holiday estates, ongoing internationalisation and
the concentration on the most attractive places.

Many members of the post-war “baby boom” generation have made fortunes,
which they increasingly invest in holiday homes in the most beautiful places on the
planet. They soon identify entirely with their new homes, whatever the country and
region they have adopted. Belonging to the community of their second home be-
comes an important part of their self concept. At the same time, younger genera-
tions are looking for homes that will allow them to lead a family life free of all con-
straints. Young people with shared interests often flock together (“snowboarder”
communities are a notable example), and look for accommodation that can cater to
their special needs (Bieger/Laesser, 2007). On the other hand legacy building in
form of creating a refuge for families over generations is another important motiva-
tion of buying real estate above revenue prices.

2
 Introduction

Americans are purchasing and investing in residential property in the Rockies and
in Mexico. Certain “costas” in Spain host entire colonies of retired people from
other countries, especially UK. Tourism areas in France are also much in demand
among people in search of holiday or retirement property. The growing internation-
alisation of the demand represents an even more important trend. Low cost carriers
assure cheap access. The upper market segment is increasingly focused on the most
attractive sites, both in traditional and in new destinations.

3 New global framework conditions and business models for

accommodation in destinations
Developers building real estate for the leisure sector are customizing their offerings
according to the new needs of the demand. They are able to offer today’s clients
exactly what they want. The aim is segmentation of the market. Second home sales-
men offer their clients the prestige of luxury apartments with services – which are
the new nec plus ultra of tourism accommodation. There is an international clien-
tele for luxury properties, now known as “trophy homes”.

In traditional destinations, the supply of lodging is fragmented into small, complex

structures. In the family-owned hotel sector, the supply is fairly rigid. In rented
apartments and second homes, the offering is adapted to the specific needs of the
customer with greater flexibility. But the supply is targeted essentially at the home
and nearby markets, often in the cheaper market segments.

Major real estate investments in innovative forms of lodging, however, are chang-
ing the accommodation structure of traditional destinations. They combine custom-
ized services and industrial methods in order to overcome the disadvantages of the
small, fragmented structures which exist at present. They make lodging “hybrid” in
the sense that they add all kind of services to the core business of accommodation.

Investors often concentrate their business activity on the real estate and leave the
management of the lodging units to tourism firms, in order to spread their risks.
The types of financing available in the holiday property market are increasingly
varied. In addition to the classic forms, property is now available “by floor”, on a
time-share basis and for “fractional ownership”, a development which AIEST has
been monitoring since its 1995 conference on real estate in the Canary Islands
(AIEST, 1995).

3
Peter Keller, Thomas Bieger

Entrepreneurs in the holiday property market have found it easier to capitalise on

this new demand thanks to favourable economic framework conditions, including
the liberalisation of the global capital markets, and interest rates in industrial coun-
tries which for a long time were at low levels. In travel, low-cost carriers have re-
duced transport and time costs, and made attractive tourism regions such as
Provence, Tuscany or Alpine ski resorts accessible for short and repeated trips in
the field of residential tourism.

4 Market mechanism and real estate development in resorts

In major tourism resorts, the real estate business is of the utmost importance. In the
trendiest areas, the gross value added each year by the sale of holiday properties
amounts to 10% or more of the total gross regional product. This creates jobs that
are much appreciated by the local population. The value added created by construc-
tion firms and real estate agencies is in such resorts often higher than that of the ho-
tel industry and the traditional forms of tourism. Concepts of political economy and
public choice can be applied to explain the tendency of destinations to avoid re-
strictions on second home building. In some tourist regions most mayors are part of
the real estate sector.

In general, the market mechanism in the real estate market in the destination oper-
ates normally, even if the visible impacts, positive and negative, are varied. The
price of real estate depends on market factors such as the construction zones avail-
able and the quality of the supply. They are also a function of the purchasing power
of potential buyers. Prices rise when land is scarce and when the quality of what is
offered is high. In a saturated market, as is often the case in choice resorts, the price
will depend on the last unit sold or the marginal sale. The differentiating factor as
compared to the urban and rural markets is the hedonistic component, in that lei-
sure- and tourism-related property prices always reflect the attractiveness of a given
destination. Prices can also be affected by an extraordinarily beautiful view, pres-
tige and snob appeal, and the mere fact of being different. Hedonistic price models
today are a valid resource of data on the impact of specific quality dimensions.

In resorts, properties which are highly appreciated represent superior investments.

During the sub-prime mortgage crisis which led, in turn, to a major financial crisis
and a slowdown of the world economy, they maintained more or less their market
value. The trend in favour of top products and qualities proved to be stronger than
speculation, and contributed to mitigating the impact of potential price bubbles.

4
 Introduction

5 Optimizing destination accommodation capacity

Accommodation capacity which is under-used makes the production of lodging ser-
vices inefficient and unprofitable. Occupancy rates of traditional hotels and rented
apartments in existing tourism regions are generally higher than those of properties
which are occupied by their owners and not put on the rental market. Empirical
studies have shown that, on average, a second home is used by its owner for seven
to eight weeks per year. Only 10% of owners rent their apartments in resorts, in or-
der to improve their occupancy rates. It is noteworthy, however, that the expendi-
ture of those who occupy second homes can be as significant locally as in the case
of visitors coming for the day (Bieger, 2005).

The difficulty of the situation regarding existing accommodation is often put down
to the excessive construction of properties which are not put on the rental market, a
phenomenon referred to by opinion leaders in destinations as “cold beds”. This ar-
gument is not totally convincing. If all the owners of holiday properties were to rent
out their houses and apartments, the amount of available units would increase and
exert a downward pressure on the price of accommodation in a given destination.
Neither would it improve the situation of the small family-run hotels and guest-
houses which also suffer from low occupancy rates. These are not in a position to
rationalise, to cut their costs, or to reinvest. As for the existing stock of rented
apartments, the situation is even worse. Not being standardised or managed profes-
sionally, they are often difficult to place on the commercial market.

These complex developments which result from integrated analyses of supply and
demand side make the accommodation structure of traditional destinations rigid.
Neither the maintenance of traditional accommodation structures nor the growth of
properties occupied by the owners, even if these are partially rented out, represent
efficient solutions for traditional destinations. The traditional structures, particu-
larly family-run hotels, cannot attract financing because of the weak profitability of
their core business. Properties rented out by their owners have a discriminatory im-
pact on the local accommodation as a whole and represent a shadow economy.

Innovative solutions nonetheless are emerging, driven by market forces. Real estate
investors in the high-end segment of upscale resorts, such as Courchevel in the
French Alps, are combining lodging units occupied by their owners with all kinds
of room, catering, leisure and sports services, which creates both additional income
and local jobs (Keller, 2007). Real estate investments can help to rejuvenate tradi-
tional hotels by selling rooms in the form of fractional ownership.

5
Peter Keller, Thomas Bieger

In the lower market segments, new forms of cooperation such as the “Swiss initia-
tive for the apartment sector”, which aim to standardise supply and distribute it
through internet, can internationalise private houses and apartments owned by resi-
dents and increase occupancy rates (Reka, 2007).

6 New destination strategies for a better use of real estate investments

Whereas optimising use and profitability is a task for the private sector, one cannot
deny that as well as the positive effects of real estate investments there are also
negative ones, which affect visitors and residents alike. This is particularly the case
in the most attractive, traditional resorts, such as Chamonix-Mont-Blanc, the largest
Alpine tourist centre, where the quantity of second homes is not only considerable
but also accounts for a large part at the total supply of lodging. In some major tour-
ism resorts, properties are used by their owners account for 50-80% of the total
stock of accommodation.

Investments in real estate transform traditional tourism resorts into cities and new
urban areas, which can attract new business and diversify the economy. Resorts can
be enhanced and become attractive towns close to natural and cultural attractions.
The presence of visitors and owners of second homes tends to improve the quality
of life, giving rise to a multicultural society. The negative effects of such urban ar-
eas cannot, however, be overlooked. These include the high prices asked for the
rental or purchase of houses and apartments in the best sites, and the problems that
arise from the proliferation of private transport, overuse of land and visual pollu-
tion.

The future of traditional resorts will not be assured by strategies which encourage
the maintenance of existing structures. Nor is it enough to slow down the construc-
tion of tourism-related apartments and homes. One far more important trend is the
effort to combine the traditional types of accommodation with new forms, as is suc-
cessfully being carried out at integrated resorts such as Whistler, in the Canadian
Rockies, where the AIEST Conference 2008 on real estate development and its im-
pact on destinations will take place.

Rejuvenating the life cycle of existing accommodation may require attracting large-
scale investment in the new types of accommodation which can offer higher occu-
pancy rates. Such investments, which will have to resolve the problems associated
with smaller companies, can provide a new source of profits for potential clients.
The future strategies of destinations must include structural changes likely to en-
courage the diversification of lodging, together with a more standardised range of
products.

6
 Introduction

Regional and local authorities have an important role to play. They can make it eas-
ier to derive the full benefits from new housing and accommodation strategies in
tourism regions. They should promote tourism by facilitating investment in those
types of accommodation that, given appropriate management and marketing, can
ensure satisfactory occupancy rates. These promotional measures need to be con-
ceived within the framework of a master plan designed to stimulate and guide de-
velopment of the tourism accommodation sector, while also taking the housing
needs of the local population into account. The objective of such a plan must be to
reduce the negative impact of the concentration of holiday properties, using the
tools of both regional planning and fiscal regulation.

To achieve the desired level of development in a market economy a basic principle

must be observed: fiscal measures must be given preference over restrictions. Rein-
vesting the resulting tax revenue could help to revitalise the existing stock of ac-
commodation. And simplified income tax should be applied to enhance renting out
of existing second homes. In addition new forms of investments like resort building
should be applied to allow for new and mixed forms of accommodation and new
forms of operations like semi serviced apartments should be introduced. Depending
on the type of destination (position on the destination life cycle, competitive posi-
tion of a destination and distance to the main markets) different strategies for real
estate developments should be applied. At the end a mature top destination should
target leveraging returns on real estate development for a possible relaunch whereas
for example a peripheral medium destination should target an attracting new inves-
tors by a large scale resort.

7
Peter Keller, Thomas Bieger

Bibliography
AIEST (1995), Real Estate Business and Tourism Development, Vol. 37, St. Gallen, p. 395.
Bieger, Th./Laesser, Chr. (2008), Hybrid forms of accommodation: Market needs and
international trends, in: La Vie économique (5), pp. 46–49.
Keller, P. (2007), Real Estate: From Boom to Imbalances in Tourism Resorts, Conceptual
Framework and Proceedings, 9th Summit of Tourism Chamonix-Mont-Blanc, France.
Laesser, Chr. (2007), Limits of traditional business hotels and international developments in the
accommodation industry, Conference given at the Hotel Finance Forum, Lenzerheide.
Swiss Travel Bank/REKA (2007), Swiss Apartment Initiative, Final Report, Berne.

8
 Section 1:
The Role, Structure and
Development of Destination
Real Estate Markets

9
 Spain and Croatia: Traditional versus
new markets for residential tourism

Jordi Datzira-Masip & Marco Julià-Eggert

Abstract
The paper is to present the current situation of the Spanish and the Croatian prop-
erty markets, with special focus on residential tourism, and therefore, comparing a
traditional market versus a new market. Thus, explaining the phenomenon of resi-
dential tourism and identifying the most relevant issues affecting the development
of real estate in both countries, Spain and Croatia. Highlighting the importance of
residential tourism for both countries in terms of their economic results, and there-
fore, understanding the way in which the development of residential tourism affects
the overall economy. Defining the residential tourism model and the factors influ-
encing both countries and, highlighting the way in which residential tourism has to
adapt and compete in a more sophisticated and globalized world.

Keywords: Spain, Croatia, residential tourism, supply, demand, competitive

advantages and competitive disadvantages

1 Introduction
Spain has been one of the fastest growing economies in the EU during the last
years, although it has recently started showing an economic slow-down, with
higher inflation, interest and unemployment rates. Spain began as one of the first
residential tourism markets in the late 60-ies, first driven by foreign buyers that
were searching for sun and beach at a booming destination. With the development
of the country, the amount of domestic second residence buyers largely outgrew the
foreign ones, and further contributed to boost the country’s economy, until re-
cently, when the steady and permanent increase in property prices in the first place,
and the global economic crisis in the second, struck the Spanish construction activ-
ity and has now left it facing a period of uncertainty. In addition to these factors,
there is growing competition from new attractive destinations which claim to be
what Spain more or less was, years ago. Croatia is one of these new tourism desti-
nations chal-lenging rather traditional markets such as the Spanish.

11
Jordi Datzira, Marco Julia-Eggert

Economically, Croatia has a fairly high GDP growth in comparison with other
European countries, mainly due to investments and exports, and its inflation and
unemployment rates are controlled and even decreasing slightly each year.

Data Spain Croatia

Area 505,992 sqkm 56,542 sqkm
4,872 km (7,883 km 1,777 km (4,058 km including
Coastal area including islands) islands)
Population 45,200,737 inhabitants 4,493,312 inhabitants
Madrid (3,132,463 Zagreb (973,667 inhabitants
Capital inhabitants in 2007) in 2005)
Political system Parliamentay Monarchy Parliamentary Republic
Currency Euro Kuna €1 = 7.35kn
Inflation 3.5% 3.2% (estimate)
Unemployment 8.51% 11.8%
Income tax 30.0% 20.0%
VAT 16.0% 22.0%
GDP (per capita) € 21,332 (estimate) € 9,300
GDP growth 3.9% (estimate) 4.8%

Table 1: Key country data

Source: www.cia.gov and INE (Spanish National Institute of Statistics) 2006

Croatia has, in proportion to its total surface area, one of the largest coastal areas in
the Mediterranean. Its climate, although enjoying hot dry summers and mild win-
ters, is nevertheless much more seasonal in comparison to other Mediterranean
countries. Croatia is showing relatively good economic conditions and therefore a
positive growth perspective.

Map 1: Location map

Source: www.europeemaps.com

12
 Spain and Croatia: Traditional versus new markets for residential tourism

1.1 A conceptual framework for residential tourism

There are different concepts to define residential tourism among governments, in-
dustry and the research community, and therefore, there is a need to agree upon a
common definition. As an example, according to the Spanish government “Secre-
taría de Estado de Comercio y Turismo”, residential tourism can be defined as ’an
extended tourist stay during holiday periods in a determined geographical location.
Be it a stay in self-owned or rented property. Thus, a second residence is a property
which is not the normal place of residence but used for holidays’.

After having analysed the different concepts of residential tourism, our suggestion
is to make just one simple but clear definition of residential tourism, as ’a tourist
stay at their own or rented property’.

Residential tourism has a clear impact on the local economy, providing an opportu-
nity for an additional source of growth.

Second homes
Apartments

Residential homes
Apart hotels

Holiday homes
Attached and semi-detached homes
in

Time sharing
Villas

Buy to let
Holiday clubs

Others
Others

Table 2: Residential tourism concepts

Source: own illustration

Reasons to purchase a second residence are related to the following main factors:
(A) enjoyment of a vacation or retirement destination;
(B) expected return on investment;
(C) a combination of both. Nowadays the second reason is becoming a more impor-
tant factor that some years ago, and this in turn has led to the appearance of new
models and governmental regulations to address the residential tourism phenome-
non.

2 Spain and Croatia residential tourism development

In Spain, the construction industry has been a very important activity for the Span-
ish economic growth during the last decades, which shows the importance of this
activity as a tool to promote growth and development. According to the Spanish
National Institute of Statistics, in 2006 construction represented 10.8% of the Span-
ish GDP and generated more than 12.5% of total employment.

13
Jordi Datzira, Marco Julia-Eggert

The growth rate of the construction industry more than doubled from 1996 to 2006,
while employment in construction increased significantly over the same period.
According to Grupo i, in Spain, in 2005, holiday residences represented 13% of the
total construction sector and the sector generated a total of 31 million euros of busi-
ness.
Holiday
residences
13% Main
Non
residential residences
buildings 40%
20%

Civil works
27%

Figure 1: Structure of the construction activity in Spain. 2005

Source: Grupo i, ’El mercado de la vivienda vacacional en España’
(The Holiday Home Market in Spain), 2005

The GDP in Croatia has been showing a continuous growth since the end of the
war, foreign investors started considering Croatia as a safe investment environment.
Foreign investments as well as privatization can be stated as the main causes for the
GDP in 2007 reaching 37,497 million euros.

Sources Industry Other

infrastructure 1% structures
12% 1%
Transport
infrastructure
Residential
43%
buildings
16%
Non-
residential
buildings
27%

Figure 2: Structure of the construction activity in Croatia. 2005

Source: www.hgk.hr

The most recent data provided on the construction industry is for the year 2005. It
shows that residential buildings accounted for 16% of the whole sector (although
data is not divided into primary and secondary property markets – thus further com-
parisons would need more detailed information). Considering that large infrastruc-
tures were built throughout Croatia in the last years and that residential develop-
ment was limited due to zoning plans, it is logical that most of the construction in-
vestments were related to infrastructures.

14
 Spain and Croatia: Traditional versus new markets for residential tourism

12,0%

10,0%

8,0%

6,0%

4,0%

2,0%

0,0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Spain Croatia

Figure 3: Share of construction activity in GDP. Spain vs. Croatia 1995–2005

Source: www.hgk.hr and www.ine.es

The share of construction activity in GDP in Spain showed a continuous growth in

the decade (1995–2005), while in Croatia the evolution was smaller than in Spain
and showed a more cyclical evolution over the same period.

In spite of the lack of information about Croatia’s residential tourism construction

activity, it can be inferred that if the total residential buildings account for 16% of
the total construction activity, there is still a large room for increase when com-
pared with the Spanish figures.

2.1 Residential tourism supply and demand

Spanish supply Croatian supply

Classification
INE (Spanish National Institute of Statistics) classi- DZS (National Statistic Bureau) classifies two types
fies four types of home: of homes:

Main residence
Family households

Second homes: used only for holidays
Non-family households

Empty: available for sale or rent

Other: used continuously but not habitually

15
Jordi Datzira, Marco Julia-Eggert

Volume of holiday homes

In 2001, 6.5 million homes were not used as a main Total number of households in Croatia in 2001 was
residence, representing 31% of the total homes. 1,477,377.
During the period 1991–2001, the number of homes General urban plans are, in some cases, not finished,
increased by nearly 22% in Spain. According to the and developments on a greater scale are under plan.
Spanish Central Bank, in 2006, there were more Current existing developments are on a small scale.
than 24 million homes in Spain, and there were It is estimated that there are about 4,000 residential
16 million families, in other words, Spain has tourism homes along the coast.
1.5 homes per family, which is the highest ratio in
the world.
Characteristics of holiday homes
The average size of apartments, attached and semi- Buildings usually comprise of six to twenty apart-
detached homes and villas, range from 100 to 150 ments, with a maximum of three floors.
square meters with two to three bedrooms. Growing The average size of apartments is of 60 square me-
destinations are Costa Cálida in Murcia and Costa ters with two bedrooms. In Istria (the most devel-
de la Luz in Andalucía, and the Balearic Islands oped tourism area, where also the first golf courses
where golf resorts are being built. are to be built), villas are being built inland.

Average prices
In 2007, prices increased by 5.3% and the price per In 2006, average prices were approximately 1,500
square meter ranged from 2,300 to 3,500 euros (de- euros per square meter which was 13% higher than
pending on whether it was an apartment, attached or the previous year; although the average prices for
semi detached home, villa, etc.). In 2004, prices in- luxury second homes was 2,000 euros, which is not
creased an average of 15%, the highest growth in so far off some prices in Spain. The HNB (Croatian
the decade 1997–2007, where prices more than National Bank) states that the price increase is slow-
doubled. Since 1997, the average prices have in- ing down, although the close EU entry has shown a
creased by 11%. further boost in prices for all accessing countries to
date.

Table 3: Residential tourism supply

Source: National Institute for Statistics (INE), Spanish Central Bank, Grupo i,
Colliers International and www.dzs.hr

16
 Spain and Croatia: Traditional versus new markets for residential tourism

Spanish demand Croatian demand

Properties demanded
In 2006, 110,000 properties were demanded for Investing in second home residences is bringing in-
holiday residences, representing 28% of the total teresting profit to investors, since the supply is lim-
demand for residences, and it is expected that the ited and the demand keeps growing. The demand for
figure will increase by almost 25% (to 150,000) by second homes in Croatia, although not precise data
2010. is available, is mainly from foreigners.
Demand for holiday residences is reflecting the im-
portance of foreign investment, representing 39% of
the total, and it is expected to grow even more.

Domestic demand
In 2004, the most important source regions for do- Currently, Croatians are initially acquiring new first
mestic demand were in Madrid (17%), Catalonia residences in their home towns, so the number of
(15%), Andalucía (13%) and Valencia (13%) repre- nationals purchasing property as a second residence
senting 58% of the total. In 2000, more than 20% of is rather limited.
Spanish home owners had second residences
(owned or let). They tend to acquire apartments in
buildings in traditional destinations such as Costa
del Sol in Andalucía and the Costa Blanca in the
Valencia region.

International demand
In 2004, the most important source countries for in- Of all property purchase permissions from the min-
ternational demand were Great Britain (32%) and istry, the main property buyers are: German (59%),
Germany (29%) representing 61%. 1 in 4 tourists Austrian (19%), Hungarian (4%), British (3%) and
visiting Spain choose residential accommodation American (2%).
and had a distribution mean of 2.5 tourists per sec- The top region of interest for the foreign investors is
ond residence. The average number of visits is 3 per Istria (34% of foreign applications).
year and they stay an average of 17 days per year. This data does not reflect foreigners that purchase
Only 5% of owners let their residence or lend it to through a company, which would increase the de-
friends or relatives and they tend to buy villas or mand from other countries such as Great Britain,
attached homes. Growing destinations are the Costa Ireland, etc. It also does not include Slovenians,
de Azahar in the Valencia region, the Costa Cálida who are mainly purchasing in the northern cost of
in Murcia and the Costa de la Luz in Andalucía. Croatia, as well as in some Dalmatian Islands.

Table 4: Residential tourism demand

Source: Grupo i (2006) and Colliers International (2006)

17
Jordi Datzira, Marco Julia-Eggert

According to “Light house Spain” (2005), nearly 1 million people approaching re-
tirement showed interest in buying a second residence in Spain and 16% of the
British population (9.6 million people) are either current home owners abroad or
keen to become one, and 40% to 50% of the owned properties being in Spain. Be-
tween 800,000 and 1.7 million foreigners will buy second homes in Spain, 35% of
which will be British. Foreign investment in Spanish property was, in 2004, the
highest with a total amount of 8,4 billion euros.

Norway
2% Portugal
Ireland
2% Others
3%
9%
Italy Great Britain
4% 32%
Sweden
5%

The
Netherlands Germany
France
6% 29%
8%

Figure 4: Foreign investors by country of origin in Spain 2006

Source: Grupo i, ’El mercado de la vivienda vacacional en España’
(The Holiday Home Market in Spain), 2006

America Other
2% nationalities
Great Britain 13%
3%

Hungary
4%
Germany
Austria 59%
19%

Figure 5: Foreign investors by country of origin in Croatia, 2006

Source: Colliers International, Croatia 2006

In Spain, foreign investors are mainly from Great Britain and Germany, represent-
ing 61% of the total international demand, while other countries such as France, the
Netherlands, Sweden and Italy are also significant. Growing markets for future de-
velopments are France, the Netherlands and Scandinavian countries.

18
 Spain and Croatia: Traditional versus new markets for residential tourism

In Croatia, the most relevant market is Germany, representing nearly 60% of the to-
tal international demand, while other important markets are Austria, Hungary and
Great Britain to a lesser extent. Therefore, it should be stated that the acquisitions
made by companies where foreigners are the main share holders (which is the way
to acquire properties in Croatia for those countries without reciprocity), are not
taken into account because the data available is only related to physical persons,
thus, not reflecting the real data of the market volume.

2.2 Factors influencing residential tourism

Factors Spain Croatia

Laws and regulati- Local governments have the power to The Croatian government realized the
ons decide about the use of their land need for foreign investments, thus it ad-
within the municipality. They are fi- justed the laws and regulations for easier
nanced by different taxes, such as the foreign capital inflow, although difficul-
property transfer and building con- ties remain for foreigners to acquire
struction permission taxes. homes.
EU membership Spain has been in the EU since 1986, Entering the EU is a critical factor, since
and physical person and has been benefiting from price sta- many foreign citizens have to open a
investments bility, low interest rates and structural company to acquire real estate, if recip-
funds to increase Spanish GDP. rocity does not apply.
Tax laws Spanish laws do not offer incentives to In Croatia there are favourable tax laws
foreign investors. There is high finan- for foreign investors, such as no repatria-
cial pressure from the government, al- tion taxes.
though there are no taxes in repatria-
tion of financial resources.
Affordable prices Spain has benefited for a long time Due to the war history in the past decade,
from relatively low prices, with a con- some areas still have low land prices and
stant price growth until present. How- most of the land is developing slowly
ever, price increases have started to thus maintaining the low prices. Conse-
slow-down since the beginning of quently, in Croatia (depending on the
2007. area) prices can still be very attractive.
ROI (Return on In- Average prices for residences in Spain Price increases have slowed down over
vestment) prospects increased an average of 11% from the last year though it is expected that
1997 to 2007. After a long period of they will grow slightly over the next two
relatively high ROI, at present the sec- years, and grow at a higher rate during
tor is facing a slow-down that is nega- the following years, with their entrance
tively affecting the prices, ROI, em- to the EU.
ployment rates, etc.
Positioning Spain has a good image for tourism at The Croatian coast is positioning itself as
an international level and is well posi- an upscale and exclusive coastal destina-
tioned in the tourism and residential tion, and it aims to compete with the
market. The concept of the “European French Riviera or the Italy’s, Tuscany.
Florida” occurs in the south of Spain. Currently, prices in Croatia are 30 – 40%
Current main competitors are still in cheaper than in these regions.
the Mediterranean (Morocco, Greece
and Turkey).

Table 5: Residential tourism factors

Source: National Institute for Statistics (INE), Grupo i (2007) and own illustration

19
Jordi Datzira, Marco Julia-Eggert

2.3 Current models

In order to compare both countries, a residential tourism model is defined, and in-
cludes the main factors that affect the development model of each country.

Residential tourism model

Spain Croatia
Coast development Coast protection
• No strict control on development, although • Strict control on planning processes. Urban plans
there is the Spanish coastal law, which aims are defined by the Croatian central government
to protect the coast and to control new and then rigidly applied in detail by the local
developments. In 2008, a new Construction authorities.
Code was introduced by the Spanish • Building is forbidden within 100 meters of the
government to improve construction quality. sea (in new development areas).
• Most beaches are public. • Coastal area is public.
• Urban plans are mostly defined by the local • Urban plans determine the type of buildings to
authorities, although they have to be be developed (hotel, residential, etc.).
approved by regional governments.

High density on the coast Low density (general)

• New construction laws aim to control the de- • Buildings must not occupy more than 30% of the
velopment projects for residential purposes. plot surface.
• There is no clear ratio for new residential • For residential use, usually plots of 600 square
developments, because each region and meters, with a total building volume of 400
municipality can define them according to square meters or of 6 apartments
their needs. • A maximum of three floors plus a basement
which is usually counted in the total permitted
building volume

Main concept Main concepts

• National and international hotel chains and • Small and medium hotels (aiming to attract
small and medium hotels quality international brands)
• Small, medium and large holiday apartments, • Medium hotels and holiday apartments (not for
normally to let sale)
• Medium and large residential resorts which • Small and medium residential developments for
are inland but near to the coast, normally for sale and rent
sale and rent

Table 6: Residential tourism models

Source: own illustration

20
 Spain and Croatia: Traditional versus new markets for residential tourism

2.4 Competitive advantages and disadvantages

Competitive advantages

Spain Croatia
From the country perspective
• Quality of life: climate, especially in the • Quality of life: summer climate, especially on
south and the islands, gastronomy, culture, the coast, gastronomy, culture, natural landscape,
etc. etc.
• Infrastructures with secondary international • Infrastructures with new motorways being
airports near seaside destinations that are developed along the country, as well as
used by low cost airlines, new motorways secondary international airports and ports in
and high speed train lines some coastal destinations
• Euro stability which eliminates uncertainties • Exchange rate stability and economic growth
among price fluctuation and exchange rates
• Proximity to source markets arriving by road,
• Proximity to EU markets due to the and other means of transport
improvement of communication infrastruc-
ture • Good annual rental returns for existing properties

• Better financial conditions and prices than • Extensive national marketing has positioned the
the ones of the main competitors (especially country as a favourite spot
for France and Italy)
• Relatively low interest rates and high return
on investment that attracts investors from
other activity sectors (banks, financial
groups, etc.)
• Image of Spain as a tourist destination

From its tourism property development model

• Diversified model of development based on • Concrete and well defined model for future
leisure and entertainment, sports, theme development, in accordance with the country’s
parks, ports and marinas, golf courses, spa positioning
and wellness centres, etc.

Table 7: Competitive advantages

Source: own illustration

21
Jordi Datzira, Marco Julia-Eggert

Competitive disadvantages

Spain Croatia
From the country perspective
• Urban saturation, mainly on the coast and • Legislation and laws related to the acquisition
neighbouring municipalities along with process of property and it is still not permitted
growing demand pressure for residential for foreign physical persons.
holidays
• One of the most expensive non-EU countries for
• Lower level of attractiveness for investment property purchase, with relatively high interest
purposes, due to the continuous increase in rates that affect the opportunities to invest in
land and property prices, interest rates, etc. residential properties and the overall returns on
investment
• Growing number of competitors in the
Mediterranean as well as the Caribbean and • Some urban plans still to be defined; there are
South America small plots for developments and not always
clear ownership titles.
• Climate change and drought, especially in
the south, to aid development: golf courses, • High seasonality concentrated in summer and on
swimming pools, drinking water, etc. the coast, with poor flight connections out of
high season.
• Lack of additional entertainment, activities,
services (in comparison to more developed
tourism countries)
• Not a member of the EU yet, and therefore, no
Euro currency
From its tourism property development model
• Property market bubble as a threat to the • Lack of flexibility to adjust to different
sector requirements (e.g. low density implies also over-
all higher land use, which in turn is not
• Some local governments are highly financed environmentally nor energetically cost efficient)
through building permissions and taxes.
• There is no specific model promoting the
• Promotion and commercialization systems combination of tourism resorts mixed with
are not appropriate and innovative to face the residential ownership (hotel + holiday apartments
globalization process. or private residential ownership).

Table 8: Competitive disadvantages

Source: own illustration

3 Conclusions
Each country should try to find the right positioning to attract tourists, and to define
proper residential tourism models. Residential tourism has to be balanced with
speculative investments, since many people see the purchase of a property as a safe
place to deposit their money.

22
 Spain and Croatia: Traditional versus new markets for residential tourism

The Croatian government fears that the development of residential tourism will also
have an effect on “cold beds” which are only used for a short period of time
throughout the year. Nevertheless, formulas such as making it easier for owners to
rent their apartments through professional management companies, and fostering
property rental with lower taxes, are formulas needed to encourage more investors
to maximize the occupancy of their properties. On the other hand, zoning plans as
well as building permits are tools that can be used to keep the balance between con-
struction development and tourists visiting the country, thus, better statistical and
research data on demand needs and supply characteristics is needed to help gov-
ernments and developers to maintain the right balance on the development of resi-
dential tourism in each country.

Furthermore, there are certain aspects that allow us to predict common aspects that
especially developers (other than governments) need to consider, in order to be able
to compete in a global tourism residential market, where competitors are not only
European but also North African, as well as South America.

It seems clear that there is a need to find a balance between development and pres-
ervation of the environment and in this sense, any destination has to make the effort
to find a sustainable development model according to international quality stan-
dards in order to survive in the future. There is a need to go further in the conceptu-
alisation process of residential tourism, and therefore, to move from the classic
holiday homes concept to innovative integrated sustainable resorts. Therefore, new
residential developments that are to attract tourist investments should focus on the
following key aspects:
– Full furniture service.
– Full maintenance service.
– Full rental management service.
– Not only being attractive by the design and the quality of the property itself, but
also by its surroundings and especially by the activities and services that these
surroundings have to offer.

To sum up, the Spanish residential tourism sector has been one of the pioneers in
this field, and therefore, one from which every other country could take some valu-
able ideas in order to improve its own. The Spanish model is a rather flexible one in
which lately legislative and regulative norms have been defined, and the Croatian
model is a rather rigid one, still having to prove its efficiency, attractiveness and
value in the market.

23
Jordi Datzira, Marco Julia-Eggert

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espanyols’ in II Congres de Turisme de Catalunya. 2004. Barcelona.
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(Croatian Chamber of Economy). www.hgk.hr.
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24
 Hotel resorts in South Tyrol: Drivers and constraints
for a real estate-based development

Harald Pechlaner, Lisa Kofink & Marcus Herntrei

Abstract
Resort development is nowadays in many regions based on the expansion of real
property. This study examines, to what extent tendencies of real estate development
exist in South Tyrol today. So far it can be stated, that hoteliers still focus on tradi-
tional tourist accommodation. However, related to the traditional hotel company
further real estate-based investments are done. The main focus lies on infrastruc-
tures and services that allow a stronger diversification and positioning of the enter-
prise. As main constraint the provincial building and planning act is considered.
Strategies can be distinguished according to the resorts’ location. Whereas resorts
outside of towns prefer to build new hotels, resorts located inside of towns are ex-
panding their company by buying existing hotels and cooperating with local service
providers.

Keywords: Hotel resort, real estate development, corporate growth strategies

1 Introduction
In many regions, especially in the Alps, the development of tourism started with the
establishment of Grand hotels at the end of the 19th century, the first resort hotels.
These hotels of the Belle Époque offered their guests all kinds of services and a
large number of special amenities, among them restaurants, shops, concert halls,
tennis courts and golf yards, stables, ski slopes, etc. (Pechlaner 2005). Over the
years, these early resorts lost ground and have been integrated step by step in their
community-based tourist destinations.

Today, an opposite trend can be observed. In South Tyrol and elsewhere, resort ho-
tels are founded within community-based destinations, and existing hotels are up-
graded into hotel resorts (Hartl 2002). This trend seems to be forced by an interna-
tional concentration in the hotel sector and by new hybrid types of accommodation,
both being driven by real estate (cf. Dorward 2006).

25
Harald Pechlaner, Lisa Kofink, Marcus Herntrei

But also special conditions in the Alps, such as the necessity to build up tourist in-
frastructures with accompanying services within a short period of time, might act as
a potential driver for resort development (Laesser 2005).

Apart from the legal circumstances, other peculiarities of a mountain region, for
example its topography, constitute important limits for real estate development.
Due to its geomorphologic structure, the availability of land resources is rather low
and limited to the valleys. The permanently inhabitable area amounts to 8% of the
province’s total surface (Astat 2004). However, in this small area tourism is com-
peting heavily with other types of land use, such as housing, leisure amenities or
the demands of local economy, especially agriculture. Therefore, land consumption
in South Tyrol is limited and very expensive.

1.1 Spatial planning restrictions

The conditions for real estate development in South Tyrol have been rather restric-
tive, not only in the tourism sector. Therefore, real estate-driven phenomena like
second homes have never reached the level of, for instance, certain Swiss tourist
regions. As defined by the building and planning act 1997 for South Tyrol (cf.
Autonomous Province of Bolzano-Bozen-South Tyrol 1997), new capacities for
house building were mostly limited to the local population. The quantitative devel-
opment of hotel infrastructure was subject to very strict regulations as well. Only
those hotels, already existing before 1988 could enlarge their number of beds up to
the total number existing in 1985. The aim was to enable disadvantaged enterprises
to recover their original size. Additionally the number of allowed beds was limited
according to the state of touristic development of the respective area (the less de-
veloped, the more opportunities). However, some exceptions have been provided
enabling the evolvement of a number of rather extensive resort projects.

The reform of the building and planning act in 2007 (cf. Autonomous Province of
Bolzano-Bozen-South Tyrol 2007) opened some possibilities, especially for tourist
accommodation. Nowadays municipalities can define so-called tourism-zones,
where hotel businesses can develop even quantitatively. A certain limitation with
regard to the state of touristic development is still remaining. The need for an ex-
tension of beds has however to be clearly verified in strategic and qualitative tour-
ism development concepts, which have to be approved by the provincial govern-
ment.

26
 Hotel resorts in South Tyrol: Drivers and constraints for a real-estate-based development

1.2 Objective and research questions

The objective of the study is to study the existence of tendencies for real estate-
based resort development in South Tyrol, as already observed in other regions, in
spite of a comparatively strict building and planning act and the generally low
availability of land resources. The study wants to identify potential mechanisms for
real estate-based resort development. Economic and real estate aspects will be con-
sidered apart from the restrictive building and planning law and the low availability
of land in South Tyrol.

Based on that analysis, the future perspectives of hotels in South Tyrol changing
into resorts by means of real estate development will be discussed. To this end, the
following research questions (cf. Gläser & Laudel 2004) have been elaborated:
– What are the elements of real estate-based resort development, and what are its
characteristics in South Tyrol?
– What drivers and constraints for real estate-based resort development, both
market- and resource-oriented, can be identified?
– What are future perspectives for the real estate-based development of hotel re-
sorts in South Tyrol?

2 Methodology
In a first step, the characteristics and elements of real estate-based resort develop-
ment in South Tyrol had been collected. The objective was to get information on
the different elements and the respective targets established. It should be analyzed
to what extent strategies of real estate-based development have already been ap-
plied in South Tyrol. Secondly, the drivers and constraints of resort development in
South Tyrol were analyzed. General information on drivers and constraints of real
estate-based resort development and on other circumstances had been collected by
secondary research. Both analyses were then submitted to a qualitative empiric sur-
vey. Structured interviews (cf. Gläser & Laudel 2004) have been held with manag-
ers of hotel resorts in South Tyrol and tourism experts in the province. The aim of
the survey was to analyze the relevance of identified drivers and constraints for
South Tyrol, and to collect the peculiarities of the province’s resort structure. Fur-
thermore, it serves to collect evaluations on future perspectives for real estate-based
resort development in South Tyrol on the part of key actors.

27
Harald Pechlaner, Lisa Kofink, Marcus Herntrei

The sample of hotel managers was chosen with support of the board of tourism
managers of South Tyrol. For South Tyrol’s different tourist areas they proposed
the three most important hotel resorts defined as follows (following Inskeep 1991
and WTO 1993² cited in Bieger 2002: 55): A hotel resort is a clearly defined spa-
tial area, where the hotel enterprise offers in an integrated way all services and at-
tractions the tourist considers necessary for his stay. Therefore, the hotel resort it-
self can be considered a destination. The offered services are often combined to
targeted packages in cooperation with local contractors. The hotel resort with the
greatest focus on integrated products was then chosen as interview partner for each
region. That led to a total of 10 qualitative interviews with resort managers or en-
trepreneurs.

The interpretation of the interviews was based on a qualitative analysis using the
MaxQDA program (cf. Kuckartz 2007). The data collected from the interviews was
classified according to topic-related categories (cf. Gläser & Laudel 2004). A quali-
tative approach seems appropriate, as the study in hand has a clear case-study and
descriptive character (cf. Gläser & Laudel 2004 and Mayring 2003).

On the basis of the analysis, it has been possible to find answers to the proposed re-
search questions and to identify an interesting approach to resort development in
South Tyrol.

3 Results
Before dealing in depth with the aspects of real estate-based corporate development
in the following chapters, first of all the paper takes a closer look at several organ-
izational characteristics of the accommodation facilities interviewed.

All companies surveyed are family businesses, i.e. in some cases the companies
have been owned by families for three generations, and have been managed by
them ever since. In most cases, several family members are active in the company.
The roles and responsibilities of various family members are always clearly de-
fined, only in one case several family members are of equal rank in the normative-
strategic business management. The companies studied have a size of between 120
and 650 beds, sometimes distributed among several houses. With between 60 and
80%, their share of regular guests is very high. Between 80 and 95% of all guests
are individual travelers. All companies stated their intention to achieve certain
growth targets in terms of quality or quantity.

28
 Hotel resorts in South Tyrol: Drivers and constraints for a real-estate-based development

3.1 Real estate-based development of hotel businesses

In addition to the common grounds already mentioned, there are great differences
with respect to business strategy and real estate-based corporate development. Sev-
eral companies are still concentrating strongly on the accommodation business. All
other services, including real estate-based services, are only provided in order to
improve the offer from the guest’s point of view. Other companies, however, pur-
sue wide-ranging strategies of differentiation and integration, and offer their ser-
vices to both house guests and externals. Apart from various forms of accommoda-
tion (classic hotel business, holiday apartments) and tourist offers (riding yards,
golf courts), the companies integrated most strongly also offer indirect tourist ser-
vices (hairdresser’s shop, medical practice). In addition to horizontally and verti-
cally integrated fields, the survey also discovered one company with strong lateral
integration (energy sector, wholesale trade).

3.1.1 Management of other hotels

The classic combination of ownership and management of a hotel in the traditional
sense still appears to be the most attractive model. Lease of external companies or
takeover of traditional hotels for a limited period of time in the form of manage-
ment contracts are met with almost unanimous approval among respondents, but
for a number of different reasons. For several hoteliers the management of an ex-
ternal company represents a solution for the improvement of their cash flow for a
limited period of time, while others see it as a chance to achieve long-term growth
targets. For the realization of these goals, some of the interviewees are willing to
become active beyond the borders of South Tyrol, while others think that this
would exceed the management capacities of a family business by far. Most of the
companies interviewed are investing in real property only at one site, the domicile
of the original firm, in order to achieve as many synergies (economies of scale,
scope and density) as possible. Several hoteliers receive offers for the management
of a hotel once and again, but hardly any of the offered houses or locations is at-
tractive enough. Few companies appear as operators of real estate-dependent, tour-
ist-relevant services. Exceptions are bars and restaurants. The main reason stated is
that the company’s competencies are concentrated in the field of traditional hotel
business.

29
Harald Pechlaner, Lisa Kofink, Marcus Herntrei

3.1.2 Investment in other hotels

There are very different opinions with regard to investment in accommodation real
properties and real estate-based services. Several hoteliers think that further in-
vestment in real properties only makes sense if they are outside of the entrepreneu-
rial area of liability and therefore contribute to personal risk management.

On principle, entrepreneurs invest most capital in the accommodation facility and

its real estate-based offers. If they had sufficient capital resources at their disposal,
almost all hoteliers would also invest beyond the hotel industry, for reasons of
competency and return mainly in the field of residential construction. Investments
in accommodation facilities not operated by them are out of the question for all
companies interviewed. The reason for that is that they think the success of their
investment or the value of a real property may be put at risk through the possible
mismanagement by the operator. For similar reasons many owners cannot imagine
handing over the management of their hotel real property in somebody else’s
hands. Others, however, see that as a chance to withdraw from the strenuous every-
day work of a family business.

Very few of the hoteliers interviewed would like to give investors a share in their
family business. There is no reason for that at the moment, owing to still attractive
financing expenses. According to one of the hoteliers interviewed, giving investors
a share in the company must be accompanied by significant corporate growth in-
creasing the value of the hotelier’s share in the company.

Two hoteliers would like to make further investments in sales rooms, not so much
from a land-economic point of view, but in order to bunch offers for their hotel
guests. Owing to the lack of available property, or rather the building and planning
act, however, they do not see any room for maneuver at the moment.

3.1.3 Selling the proper hotel business

All of the companies interviewed agreed on this point. At the moment nobody sees
an advantage in selling his or her own company and continue concentrating upon
the management of the company. Only one hotelier stated that this is an option that
cannot be ruled out completely for the future. One of the owners substantiated the
refusal of the sale option with the fact that in case of selling the hotel property at
market price, nothing would be left to justify the sale after the deduction of corpo-
rate debts and taxes.

30
 Hotel resorts in South Tyrol: Drivers and constraints for a real-estate-based development

3.2 Parameters of real estate management

The following chapters give an overview of the factors indicated and seen as de-
terminants with regard to their real estate management by the hoteliers interviewed.
In the course of the interviews, the significance of the factors as driver or constraint
for the development of resorts was always discussed as well (fig. 1).

Figure 1: Overview of drivers and constraints

On the one hand, a distinction between determinants which strongly depend on the
arrangement of the actual company and the available resources and competencies
was made. Secondly, factors which are mainly dictated by customers’ demand as
well as competition on the market were discussed. And finally the conditions of
operative environment were assessed.

3.2.1 Resource-based parameters

Size of the hotel business

The size of the company is a central element for investment decisions. A certain
size is necessary to manage hotel companies successfully. In most cases, qualitative
growth is associated with quantitative growth as well, as the running expenses for
costly and extensive infrastructures can only be born with a certain minimum num-
ber of beds. As quantitative growth has not been possible in South Tyrol for a long
time (see chapter 3.2.2), up to now many of the small and medium-sized companies
have suffered an investment backlog.

31
Harald Pechlaner, Lisa Kofink, Marcus Herntrei

According to the interviews carried out, an average South Tyrolean hotel company
aspires to a minimum of 100 beds. The majority of the companies surveyed is
somewhere in the order of between 250 and 650 beds. Growth beyond this figure is
not absolutely necessary for all companies, but is striven for by most of the inter-
viewees driven by entrepreneurial ambition. Another advantage from the large ho-
tel resorts’ point of view is that with their size they are in a position to appeal to
different target groups.

For the development of an integrated offer attractive for the guest, in most cases
based on real estate-based offers, a certain company size is indispensable. Only one
of the examined companies with much less than 100 beds defeats that, demonstrat-
ing that sustainable financing of offers is also possible through good pricing policy
and an improvement of the share of wallet. Nevertheless, for the vast majority of
the companies surveyed, reaching a sufficient company size is a clear driver to-
wards the development of a hotel resort.

Risk spreading
Against the backdrop of the industry’s high risk, risk spreading seems advisable.
Still, the strategies pursued in the examined companies differ greatly. Spreading
mostly concerns investments within the same industry. For example, additional ho-
tel companies were and are taken over or leased in order to generate cash flow for
the main company in the short or medium term. A majority of investments in real
estate-based services also help to increase the degree of utilization of the own com-
pany and do not pursue any direct profit objectives. In most cases these newly cre-
ated services are assimilated by the family business and no additional operating or
associated companies are formed. As a whole, opinions concerning real estate-
based risk spreading are divided. No clear identification as driver or constraint of
resort development has been possible.

In the few companies in which external real estate-based risk spreading takes place,
two strategies can be identified. One part of investments refers to real properties
outside the trade, for example for retailing or apartments. The other part remains
within its trade and invests in additional hotel real properties.

Excessive indebtedness
According to the interviewees more disturbing financial situations are to be ex-
pected in the years to come. Although the debt situation in South Tyrol is consid-
ered to be better compared, for example, to Austria, it is still seen as worrying.
Several hoteliers are said to have significantly overdrawn their credit facilities for
investments. As a rule, the credits obtained cannot be paid off within the estab-
lished terms.

32
 Hotel resorts in South Tyrol: Drivers and constraints for a real-estate-based development

Nowadays, new investments considered to be necessary every five years by most

interviewees are up against an average credit period of between 10 and 20 years. As
a result, the entrepreneurs asked reckon with a growing number of market with-
drawals, which will be accompanied by a drop in prices on the hotel real estate
market. An increase in takeovers by external investors is expected, which for their
part would favor a development towards resorts. It is said that there already are iso-
lated examples even in South Tyrol.

Need for investment on the part of the entrepreneur himself

Due to their companies’ low profitability, most hoteliers do not consider invest-
ments necessary. If it were possible to invest free capital, speculative investments
would be out of the question. Some hoteliers would be willing to make medium-
term or long-term investments in real properties. The need for investment is not
really seen as a direct driver for real estate-based resort development, as the real es-
tate market is currently considered to be too risky.

Required competencies
Several competencies, going far beyond the management of traditional hotels, are
required for the extension of a hotel company into a resort. This is true, in particu-
lar, if investments are made in other industries. In South Tyrol in most cases there
is a lack of know-how required to become active in the real estate market outside of
the traditional accommodation sector (in which extensive competencies are avail-
able). Extensive knowledge of the real estate market has only been available in very
few of the examined cases. In these cases, real estate-based expansions actually are
a possibility and are put into practice as well.

The vast majority of the interviewees, however, state a lack of competencies that
prevents real estate-based resort development in South Tyrol. “Most (South Tyro-
lean) hoteliers are good landlords, but bad entrepreneurs.”

Successor establishment
In the course of the years to come, a great number of companies will be confronted
with the challenge of successor establishment. The examined companies have al-
ready been through at least one company transfer. One of the companies surveyed
is currently going through the handover phase.

In most cases, the succession was coupled with qualitative and quantitative growth
as well as a differentiation strategy. In one case the parent generation arranged the
successor establishment to several children by purchasing several additional ac-
commodation facilities prior to the transfer. This way, one part of the company was
transferred to each of the successors.

33
Harald Pechlaner, Lisa Kofink, Marcus Herntrei

More often, however, the transfer is accompanied by reconstruction and expansion

on the part of the succeeding generation, and existing economic models are taken
apart. The companies surveyed are working on the assumption that in future prob-
lems of succession in South Tyrol will result in increased resort development. A
great number of companies had not made major investments for a long time. In the
context of succession this results in strong pressure to act. Owing to the low profit-
ability of the traditional hotel business, many members of the succeeding genera-
tion are not willing to take the risk of investment. Therefore, an increase of market
withdrawals is expected. As a result, this would lead to the acquisition of hotel real
properties for sale by existing hotels or by other investors. For both cases the inter-
viewees predicted a development towards hotel resorts.

Structure of ownership
The structure of ownership is characterized by a great number of family businesses
(Pechlaner et al. 2003). Most of the companies are managed by the second or third
generation. In many cases, the strategic management of the companies has already
been assumed by one of the heirs, with the rest of the existing siblings involved in
other functions (as operators or owners of parts of the company and real properties,
as heads of internal departments), but almost always as associates.

In contrast to big hotel chains, according to the respondents there is a strong emo-
tional bond of the proprietors with the company. The sense of responsibility not
only for the company and its staff, but also for the family, complicates the switch-
over to alternative concepts of running the company. The same business model has
been applied for many generations.

Due to ponderousness and innovation resistance, interviewees rather consider the

factor of ownership structure to be an impediment to the development of the hotel
real property and the company towards a resort. This impediment, however, is not
always considered to be insurmountable. The answers underscore that a family
structure allows developments that would not be possible with external partners.
The emotional bond with the company is an assessment factor, for example in case
of capital procurement.

34
 Hotel resorts in South Tyrol: Drivers and constraints for a real-estate-based development

3.2.2 Market-based parameters

Availability of capital
According to the hoteliers questioned, in South Tyrol the lending behavior of the
banks does not cause any problems yet. General conditions such as capital rules on
the part of the European Union to the banks (see European Parliament and the
Council 2006) are not significantly perceptible yet. An important role in South Ty-
rol is due to the “principal bank”. Longstanding relationship and good knowledge
of the company also have a good effect on lending behavior. Even so, now and then
companies also cooperate with other Italian or foreign banks, which offer better
conditions, but require more accurate credit ratings and analysis of corporate plan-
ning. The latter is generally becoming more important for lending in South Tyrol.

In the medium term, interviewees expect strong firming up of control mechanisms

as well as more rigid lending behavior on the part of the banks. As a result, invest-
ments are only planned in small steps or postponed entirely.

Special market demands

During the last years, hotels in South Tyrol have registered strong demand in the
field of family holidays. This prompts many hotel companies to specialize in this
customer segment. The family oriented demand for example caused a renaissance
of the model “farm holidays”. The resort operators have identified that demand and
see the chance for cooperation or to integrate that special form of accommodation
into their offers. An advantage might also be the reduction of resistance against re-
sorts by integrating small local entrepreneurs.

Respondents also observed that the guests from new source markets make other
demands (with respect to size or variety of products), corresponding more to an in-
tegrated hotel resort than to the offers of the South Tyrolean family businesses.

Differentiated willingness to pay

Social changes during the last years also resulted in changing consumer behavior.
Among other things, this also led to the customers’ differentiated willingness to
pay, which can be felt in South Tyrol as well. Either low-budget-offers or high-
priced segments are demanded. However, one problem is constituted by the fact,
that guests, who are not willing to pay much, do not renounce cost and infrastruc-
ture intensive offers, such as wellness.

35
Harald Pechlaner, Lisa Kofink, Marcus Herntrei

The larger and more differentiated, i.e. the more similar to a resort, a company is,
the better it is prepared to meet the guests’ various demands. Accordingly, most of
the hotel businesses surveyed offer different categories with different combinations
of services. One of the examined companies offers exclusive services only for cus-
tomers with high willingness to pay. The consequence for traditional accommoda-
tion without the possibility to differentiate would be to run either a 5-star hotel or a
youth hostel, as in these cases the accommodation category and the products asso-
ciated with it coincide.

Growing competition
The industry’s pressure to adapt is said to cause the companies to be better than
others. This means that they should stand out from other companies through prod-
uct innovation and quality. In this respect, growing competition may be seen as a
driving force for real estate-based resort development. The pressure to adapt takes
effects towards diversification and/or integration, particularly towards the acquisi-
tion of real estate-based offers. But competitive pressure alone rarely is the sole
cause of expansion. Winners are often only those companies which detect trends
early on and choose a strategic product focus. Not only prices, but above all entire
packages decide on a company’s position. In this context, resorts are a recipe for
success (cf. Falkensteiner case study in Pechlaner et al. 2005).

Utilized capacity and seasonality

With the development of their hotel businesses into a more integrated model, all en-
trepreneurs questioned had been able to increase their capacity utilization and/or to
reduce the seasonality of demand. The total capacity utilization of the companies
amounts to up to 140%. Periods of operation amount to more than ten months a
year. This makes it possible to develop specific offers and infrastructures for the
low season. The efforts to establish South Tyrol as an all-year destination promote
resort development, as with the enlargement of season the dependence of the desti-
nation on such large differentiated structures, such as resorts, increases.

Need for investment by others

Enquiries regarding involvement of international investors or private equity funds
in South Tyrolean hotel companies have not been observed yet. If interested parties
should turn up in future, however, it is expected that they would prefer to invest in
existing resort structures or convert small companies into such resorts. Local entre-
preneurs are on the defensive against (large) international investors. The wish to
keep the tourist trade in local hands prevails.

36
 Hotel resorts in South Tyrol: Drivers and constraints for a real-estate-based development

As main reason for the absence of international investors the interviewees state the
poor chances of making good profit in South Tyrol. In addition, the companies are
too small and/or the destination is not within easy reach for remote source markets.
According to that the absence of foreign investors goes back to an accumulation of
the parameters.

Decreasing revenue
A majority of the hoteliers surveyed state diminishing results in traditional hotel
business. This is said to affect the low-price and medium-price segment in particu-
lar. From this point of view a differentiation and expansion into a resort is quite at-
tractive. One or the other hotelier, however, also makes out chances with top-
quality offers in the pure hotel business.

The low level of prices for overnight stays in South Tyrol is considered to be the
cause of the drop in earnings. This result in the fact that it is not possible to gener-
ate the reserves required for further investments.

3.2.3 External environmental parameters

Management of the destination

The influence of the regional tourism board (Südtirol Marketing Gesellschaft) SMG
as destination management organization (DMO) on resort development is judged
very differently or even inconsistently by the interviewees.

In the last years, the DMO started to reinforce its campaigns in Great Britain and
the states of Eastern Europe in order to get the respective source markets going.
With this strategy the DMO is said to further a development towards hotel resorts,
as these markets are less familiar with the type of family business predominant in
this country. Guests from these countries are said to prefer larger structures. Only
one hotelier, on the other hand, is convinced that under the influence of South
Tyrolean politics the DMO is supporting family businesses and accommodation
companies structured in small units. Therefore, the DMO is said to be able to affect
the accommodation model by controlling tourist target groups.

Spatial planning restrictions

The spatial planning so far is seen as one of the most fundamental constraints of fu-
ture hotel and resort development. The strict limitation in force during the last years
has permitted quantitative growth only in selected regions of South Tyrol with un-
derdeveloped tourist offers.

37
Harald Pechlaner, Lisa Kofink, Marcus Herntrei

Therefore, even companies owning suitable areas have only been able to use these
parcels for qualitative expansion such as wellness or sports facilities, investments
which are strongly linked to the offered products. Most hoteliers are pinning their
hopes on the reformed building and planning act. In future, a majority of the inter-
viewees expect more elbowroom for investment in real property through the identi-
fication of tourist areas, inside of which a coordinated degree of quantitative and
qualitative growth should be possible.

Investments in real estate to finance the actual hotel business (for example through
the sale of holiday apartments) are said to be absolutely impossible in South Tyrol.
Holiday real property must not be sold to foreigners. The objective of this regula-
tion is the prevention of second homes and "cold beds". Therefore, models of frac-
tional ownership have been ruled out as well.

Availability of land resources for building

Owing to its topographic situation, in South Tyrol there is a great shortage of de-
velopment areas for all business sectors. This lack has a negative effect on land
prices, which are comparatively high. On principle, development areas on the out-
skirts of towns and villages are cheaper than near the centers. Therefore, building
new hotel real properties is said to be made more difficult. Especially larger areas,
like those that would be required for resort-like structures, are extremely hard to
obtain. In addition the interviewees state that available parcels rarely border on the
original premises, but are mostly located in areas less attractive for tourism. The
only way out of this dilemma is said to be the acquisition of existing real proper-
ties. These properties should then either be converted or demolished and rebuilt.

4 Conclusions
4.1 Perspectives for resort development in South Tyrol
According to the discussion above, the survey revealed differences in terms of the
strategy pursued by the hoteliers and their attitude with respect to the aspects of
corporate development concerning land economy. In this context, the applied strat-
egy seems to depend on the location of the own hotel resort. One can make a dis-
tinction between central locations and locations outside of municipal areas.

38
 Hotel resorts in South Tyrol: Drivers and constraints for a real-estate-based development

4.1.1 Locations outside of towns

The hotel resorts in areas outside of municipal areas, for the most part 4-star
houses, are surrounded by agricultural green spaces. Their locations are usually
identified as areas with little developed tourism. That’s why, provided that such ex-
pansion is supported by local politicians and promoted by spatial planning, in most
of these cases there are sufficient possibilities of quantitative as well as qualitative
expansion. Owing to the given possibilities, the studied hotel resorts located outside
of municipal areas pursue expansion strategies aiming at resort development. The
quantitative expansion these resorts are striving for takes place in consideration of
the already distinct differentiation of the willingness to pay, quite often towards the
3-star segment.

Altogether, however, companies are striving for diversified offers on various qual-
ity levels. On account of the legal situation, outside of municipal areas the con-
struction of hybrid forms of accommodation and the alienation of apartments to fi-
nance investments is out of the question as well. Due to the location outside of
municipal areas and the mostly low intensity of tourism resulting in a lack of pro-
viders of tourist and tourist-relevant services, the hotel resorts situated in the open
land make a great effort to pursue the development of real estate-based offers in the
sense of qualitative expansion and vertical integration inside and outside of the es-
sential tourist performances (e.g. wholesale and food trade, energy industry, etc.).
Cooperation with other providers of tourist services is rather unusual, the services
offered are mostly provided by the company itself. So these companies pursue the
idea of a resort in the narrower sense. It has been possible to observe that especially
the big hotel resorts outside of municipal areas offer a relatively wide range of
products with the objective to appeal to various target groups.

4.1.2 Locations inside of towns

The hotel resorts located in village centers are lacking green spaces, and therefore
quantitative possibilities of expansion. In addition, these sites are mostly areas with
highly developed tourism, which may not be further developed due to the building
and planning act. As a result, the hotel resorts located in village centers are pursu-
ing other strategies than the companies surrounded by grassland. The former have
less floorspace and fewer beds, and are mainly positioned in the 5-star segment.
Hence these hotel resorts are betting more on solvent guests than on mass tourism.

39
Harald Pechlaner, Lisa Kofink, Marcus Herntrei

Until now, no diminished willingness to pay in these hotel resorts has been ob-
served, the differentiation of the willingness to pay, on the contrary, appears in the
presence of a wealthy, international clientele, for which separate, markedly exclu-
sive structures and offers are about to be created in future. In these cases the posi-
tioning occurs upwards instead of downwards.

The development of real estate-based services is pursued less intensively not only
due to the lack of building sites, but also owing to the anchoring of the own com-
pany in the deep-rooted village structures. The resulting social obligations prevent
stronger vertical integration of the hotel resort. Accessorial services for the guest in
the sense of integrated offers are provided by cooperation with other local service
providers. This cooperation is favored by local networks existing for several gen-
erations. Obviously, these networks favor an approach to be called the “cooperative
resort development model” below. However, this cooperation is to be further elabo-
rated (cf. Pechlaner & Raich 2007).

Today’s hotel resorts in the village centers excel by a more distinct focus on prod-
ucts than most large resorts located outside of municipal areas. Moreover, the op-
erators of the hotels at central locations have realized long ago that even if they can
fetch comparatively high prices, more beds will be necessary in future to be able to
offer all services to ever more demanding guests, and to be able to finance these
services as well. Due to the lack of building sites, it is not possible to succeed in
safeguarding the competitiveness through expansion, but mainly through coopera-
tion. In the context of the survey it has been possible to establish such approaches
in three out of four places. These approaches had different forms and properties.
The simplest form of cooperation observed is one between two neighboring hotels,
which have been sharing their infrastructures for some time and fared very will
with this attempt, so that the scope of cooperation is to be widened and the form of
cooperation to be intensified. For this purpose they are currently thinking about tak-
ing the next step from cooperation agreement to mutual involvement or merger.

A long-term approach for the expansion of hotel resorts located at village centers
are holding companies, which have newly been established in a few cases. Local
hoteliers join forces and acquire an accommodation facility that has run into finan-
cial plight, and the one hotelier who is able to achieve the biggest synergetic effects
will take over the management of the newly built and radically modernized house.
In another village the establishment of a rescue company comprising financially
strong local entrepreneurs is currently discussed. The objective of this cooperation
will be to buy up as many as possible of the accommodation facilities in the village
that are to be closed, in order to make it more difficult for non-local investors and
operators to enter the market.

40
 Hotel resorts in South Tyrol: Drivers and constraints for a real-estate-based development

The development pursued by this approach leads to the assumption that slow but
steady development, an organizational change from the existing community-based
destination model towards a corporate-based resort model has been initiated under
the leadership of local key companies (cf. Pechlaner 2005).

4.2 Outlook and further need for research

According to the plan of the provincial government as well as the regional tourism
board, South Tyrol should become an all-year destination in order to improve the
value added and to increase its international competitiveness. The people responsi-
ble are mainly thinking of existing themes and products, for example the Christmas
markets or similar events. Appropriate offers and perfectly arranged packages are
intended to appeal to international guests as well.

Aside from a few city hotels, only a handful of companies in South Tyrol are open
all year round – the more integrated hotel resorts. In spells of bad weather and dur-
ing the in-between season, these houses have a comprehensive range of offers
available, and they are visible in foreign source markets not least because of their
size. Therefore, these resort hotels already take up a key function for the develop-
ment of the all-year destination South Tyrol.

For certain is that in South Tyrol the development of resorts in the narrower sense
is still being blocked by the natural environment as well as legal barriers. More-
over, the survey has shown that South Tyrolean hoteliers as well as local people
strongly disapprove of foreign investors as well as big building projects. On the
other hand, tendencies of resort development are already perceptible, in the classic
sense at locations outside of municipal areas, and in the sense of the “cooperative
resort development model” at locations inside of towns.

These observations bring up the following questions, which demonstrate the need
for further research to assess the future perspectives of the development of hotel re-
sorts in South Tyrol:

41
Harald Pechlaner, Lisa Kofink, Marcus Herntrei

– To what extent can the “cooperative resort development model” deal with all
aspects of an all-year destination and with all requirements of international
guests?
– Does an internationally successful all-year destination require the big brands of
the accommodation industry?
– Under which circumstances can the cooperative “South Tyrolean model” work
in the long term, and what are factors or constraints of success?
– How can the networking quality within the “cooperative resort development
model” as well as the contribution of each individual social and business part-
ner be optimized?

42
 Hotel resorts in South Tyrol: Drivers and constraints for a real-estate-based development

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43
 Real estate market for long stay tourists and
expatriates in Phuket

Manat Chaisawat & Oraphan Tungsomboon

Abstract
The study of real estate market for long stay tourists and expatriates in Phuket, was
designed to identify the factors influencing the decision making process for choos-
ing a real estate in Phuket. The population of the study were long stay tourists and
expatriates who were living there at the end of 2006 as well as the property devel-
opers. The total samples of 392 were selected from both long stay tourists and ex-
patriates proportionally to their population. The sample size of 43 developers was
also selected from the population of 76 projects. The findings indicated that prod-
uct, price, people, marketing mix factors were rated at high level of significance for
both of long stay tourists and expatriates in choosing the real estate in Phuket.
Physical evidence was rated at the highest importance level for expatriates as op-
posed to long stay tourists at high importance level. Place, promotion, and process
were also rated at moderate level for both groups. Whereas, all of the marketing
mix elements were rated by real estate developers at high level, except people and
physical evidence factors at the highest level. The study suggested that both long
stay tourist and expatriate target groups should be supported as a niche market to
attract small volume and high spending of the visitors to Phuket in the long run.

Keywords: Real estate, marketing strategies, long stay tourists, expatriates,

Phuket, Thailand

1 Introduction
According to Bank of Thailand statistics, tourism contributed 9% to the country’s
GDP (Gross Domestic Product) in 2005 and international tourist arrivals reached
13.4 million in 2006. Historically, tourists stayed in hotel accommodation, but fol-
lowing a global trend there is a growing demand for villas and condominiums –
particularly for long-stay tourists. There is also a growing demand from tourists are
planning to buy their own resort properties in Thailand.

45
Manat Chaisawat, Oraphan Tungsomboon

“Resort property development is an extension of the tourism industry and is an im-

portant element in attracting high income short and long-term stay tourists, says
David Simister, chairman of CB Richard Ellis Thailand“(Propert Report, 2007,
p.22). Phuket (The Pearl of the Andaman) has become a worldwide known for the
first class tourist destination, attracting visitors from all over the world. Some of
them dream about living here and owning some properties in Thailand. A develop-
ment of property for international market has followed the path of tourism devel-
opment. Phuket tourism revenue has increased by Baht (Bt) 2 billion, from Bt 75
billion in 2004 to Bt 77 billion in 2006 (The exchange rate approximately Bt 32 to
USD 1). This is a big jump from the year after the disaster, when revenue tumbled
to just Bt 28 billion in 2005. Phuket welcomed 4.7 million visitors in 2004 but only
4.5 in 2006. “Phuket real estate market keeps growing despite the ravages of the
tsunami nearly two and a half year ago. Both foreign and Thai developers and buy-
ers have descended upon the 523-square-kilometre island, driving up land and
property prices and spawning more and more premium and super-premium pro-
jects. After one or two visits, many tourists decide to stay on. These foreigners are
the engines driving the property boom. Real estate consultant and Thai Appraisal
Foundation chairman Sopon Pornchokechai says foreign property investment out-
paced that by Thai buyers by Bt 38 billion in 2006. Thai bought property worth
about Bt 32 billion, while foreigners spent Bt 70 billion. According to the general
manager of Raimon Land’s Phuket operation, Steve Brajak, only 35% of foreign
buyers in Phuket actually live in Thailand. Most of them are expatriates such as
Hong Kong, Singapore and China, who return once a year for up to a month“
(The Nation, Monday, April 30, 2007, 1C).

The island of Phuket has seen the major growth of high end home development in
recent years. Phuket is one of the fastest growing property markets in the world. All
independent indicators predict that 2 million Europeans will seek property in
Southern Thailand during the next 10 years (Permpoolsab, 2006). Thailand Na-
tional Statistics Institute predicts that immigrant population of Thailand will rise by
as much as 5.5 million people by 2010. Therefore, rising demand for property will
continue to fuel the growth of the Phuket property market for many years to come.

The key statistics of land and property in Phuket indicated as follow (The Nation,
Monday, April 30, 2007):
– In the first quarter of 2007, 81 residential projects were launched offering a
total of 9,230 units with combined value of Bt 32.5 billion. So far, 3,476 units,
or 62% of the total, have been sold. In terms of value, the sold units
account for 53% of the total.

46
 Real estate market for long stay tourists and expatriates in Phuket

– In 2007, developers were licensed to construct 3,315 housing units with

combined value of Bt 11.7 billion. They were equal to 7% of residential units
launched in Bangkok and peripheral areas. In the first quarter, 878 units were
launched, valued at Bt 3.1 billion.
– The average resort home price is Bt 25.3 million, and the average price of a
condominium unit is Bt 31 million.
– Due to limited resources, a 1.6 –hectare beachfront land plot can cost Bt 25
million, or Bt 15,625 per square metre. On Patong Beach a plot of the same size
can cost Bt 40 million.
– Land prices had appreciated during the past two years. Beachfront plots on Had
Mai Khao were quoted at Bt 5 million per rai (Bt 31.25 million per hectare) in
2007, compared to Bt 4 million in April 2006. A plot on Rawai Beach was
priced at Bt 10 million per rai in 2007, compared to Bt 7 million two years ago.

Long stay visitors to Thailand are steadily on the rise, regarding to retirees and visi-
ting friends and relatives of the large expatriate community in the kingdom. Long
stay visitors from the industrialized countries of the ’North’ as retirees and pen-
sioners find it much more cost-effective to escape their cold winters by staying
relatively inexpensively in Thailand. This trend has accelerated in recent years re-
garding to the strength of the Euro. Many retirement homes are coming up in parts
of Thailand to cater to this growing market segment According to Tourism Author-
ity of Thailand statistics, in 2004, a total of 568,620 visitors stayed in Thailand for
more than 30 days. This was up by 7.15% from 2003 and comprised 4.88% of total
visitor arrivals. The top five markets for long stay were Japan, United Kingdom, the
United State, Germany and China. Another major market is Sweden (TAT, 2004).

In recent years, Phuket has become more than just a spectacular holiday destina-
tion; it is now home to literally thousands of expatriates, who have found the tropi-
cal climate, stunning vistas and international standard facilities very much to their
liking. The Germans make up the largest contingent of Phuket’s community of
12,000 expatriates out of a total population of some 300,000 (EXPAT, 2006).

There is a wealth of recent and new property development on the island, offering a
wide range of choices. The pioneer of property development in Phuket is Laguna
Resorts & Hotels Public Company limited. The company owned by Banyan Tree
Hotels & Resorts. This property started from an old tin mine as the founder of the
property; Mr. Ho Kwon Ping mentioned “I still remember the day in the 1980s
when Claire and I first came across a stretch of land by Bang Tao Bay (Thailand).
It was a disused tin mine and not very attractive to many people. We purchased it
on a whim.

47
Manat Chaisawat, Oraphan Tungsomboon

We only found out later that it had been declared irreclaimable by a UN develop-
ment report because of pollution from the mine“ (Hotel Investment outlook, Sep-
tember 2007, p. 23). Now the company was listed on the Stock Exchange of Thai-
land in 1993 and has combined hotels and real estate with an emphasis on quality
and environmental protection, having received numerous environmental and tour-
ism awards. Today, Laguna Phuket is a successful resort complex comprising six
deluxe hotels, private villas, luxury spas, a shopping village, an 18-hole golf course
and myriad recreation and leisure facilities. Laguna Phuket property developments
include:
1992 Laguna Homes, 54 land plots
1993 Sheraton Island Villas, 52 units
Allamanda Condominiums, 239 units
1997 Banyan Tree Two-bedroom Pool Villas, 12 units
2001-4 Laguna Residences, 49 units
Laguna Townhomes, 64 units
2005 Banyan Tree Two-bedroom Pool Villas, 14 units
2006 Banyan Tree Double Pool Villas, 22 units
Dusit Laguna Villas, 28 units.

The other high-end property development in Phuket is Royal Phuket Marina

(RPM). RPM, Thailand’s first world-class luxury lifestyle marina community rival-
ling top resort communities in Europe and the Caribean, is located on Phuket’s up-
and-coming eastern seaboard overlooking scenic Phang Nga Bay. It is a home to a
Fisherman’s Wharf-style “Boardwalk“. Of restaurants, the island’s trendiest new
spa and wellness centre, up-market shopping and recreational facilities include
swimming pools, tennis courts and state of the art fitness centre. A 5-star hotel and
exclusive private beach club on a nearby tropical island are also on offer (The Lux-
ury Residences, 2007). RPM recognitions: “Best International Design“, 2007-
International Property Awards; “Marina Five Gold Anchors Award“, 2006-British
Airways ’First Life’ Magazine “Best of Best“; “Best for Boating“, 2005-Conde
Nast Publications; “A Great Place to Retire“, 2005-Forune Magazine.

The marketing for real estate, specifically marketing strategy became essential to
every developer nowadays as it is an important tool in creating and keeping cus-
tomers by communicating to and giving the target market customers what they
want, when they want it, where they want it, at a price they are willing and able to
pay (Lewis and Chambers, 1999). A strong and consistent marketing message will
help focus on the target market and highlights each real estate competitive advan-
tages.

48
 Real estate market for long stay tourists and expatriates in Phuket

As aforementioned it found that long stay tourists and expatriates are one of the
major real estate markets. David Wade wrote on the Tropical Homes Newsletter
(2006) that the service apartment market in downtown Bangkok is expected to im-
prove in the second half due to rising demand as reflected by the continued increase
in number of expatriate. The rising number of expatriates in Thailand is boosting
the demand for real estate. Moreover, according to the Alien Occupational Control
Division of the Departments of Employment, the number of expatriates holding
work permit in Bangkok totalled 64,352 as of May 2006, up 16.1% year on year.

2 The objectives of the study

The objectives of study are
(1) to investigate the real estate market for long stay tourists and expatriates in
Phuket, and
(2) to identify the factors influencing in the decision making process for long stay
tourists and expatriates.

3 Methodology
The population of the study comprised of two distinct groups, real estate developers
and foreigners (long stay tourists and expatriates) who stayed in Phuket at the end
of 2006. The sample size of 43 developers was selected from the total population of
76 projects by selecting only the selling price per unit over Bt 10 million. The total
samples of 392 were selected from both long stay tourists and expatriates propor-
tionally to their populations (7,227 long stay tourists and about 12,000 expatriates
in Phuket) by using Taro Yamane method at 95% confidence level.

The data gathered by the voluntary completion of questionnaires at the Phuket Im-
migration Office during March 12th to April 16th, 2007 as well as forty-three ques-
tionnaires were distributed to qualified real estate developments. The SPSS (Statis-
tic Package for the Social Science) was employed to evaluate the final result of
quantitative method. Marketing mix elements were measured in terms of their im-
portant to both populations of the study. The level of importances also was meas-
ured in 5 interval levels in likert scale: 1.00 – 1.80 = the lowest important, 1.81 –
2.60 = low important, 2.61 – 3.40 = moderate, 3.41 – 4.20 = high important, 4.21 –
5.00 = the highest important.

49
Manat Chaisawat, Oraphan Tungsomboon

4 The results
The findings from the study are as follow:

4.1 Long stays tourists and expatriates

In terms of demographics variables: We found that long stay tourists, more than
half of the samples were male with age mostly between 51–over 60 years old and
come from Europe. Married status, single, with lower than bachelor degree educa-
tion, unemployed/retired, earned USD 30,001–40,000 per year. While from 245
expatriates, more than half of the samples were male with age mostly between 31-
over 40 years old and come from United Kingdom. Most were single, with bachelor
degree, company employee, earned USD 40,000-50,000 per year.

In consideration of tourism behaviour: Most of long stay tourists spent time in

Thailand more than 10–20 weeks a year. The majority of long stay tourists live in
Chalong and Rawai areas, as it is quieter than any other places and they also prefer
to live in this area in the future. Whereas, most of expatriates have been working in
Thailand 1–5 years and also currently live in Chalong and Rawai areas and they
prefer to live in Kamala and Surin areas more than Chalong and Rawai areas, as it
is closer to their company. Both groups of sample like Thai style architecture and
pay less than Bt 15,000 per month for their accommodation. Whereas, many expa-
triates already own a house in Phuket.

The access to the information of real estate: Most of long stay tourists and ex-
patriates got the information from friends and family, and Internet and also prefer
to drive around to look for the property project.

In terms of marketing mix elements for those long stay tourists and expatri-
ates prefered are indicated in table 1.

50
 Real estate market for long stay tourists and expatriates in Phuket

Marketing mix elements Long stay tourist Expatriate Sig.

Mean SD Mean SD level

Product
Creditability of the developer 4.07 0.88 4.34 0.93 0.00*
Interior design 3.74 0.85 3.96 0.85 0.02*
Overall size of the accommodation 3.63 0.89 3.90 0.77 0.00*
Space in each room 3.70 0.83 3.98 0.76 0.00*
Telephone line connected to high speed
3.89 1.08 3.79 1.07 0.38
internet
Enough parking 3.58 0.94 3.64 0.94 0.52
House included pool 3.01 1.15 2.92 1.18 0.47
Own garden area 3.45 0.98 3.65 0.96 0.04*
Layout of the house 3.73 0.92 3.65 0.96 0.22

Total 3.64 3.77

Price

Value for money 4.14 0.84 4.42 0.80 0.00*

Availability of finance 3.33 1.12 3.51 1.15 0.12
Favorable payment term 3.29 1.08 3.44 1.10 0.18
Electric and water rate 3.57 1.03 3.46 1.06 0.31
Total 3.58 3.71
Place
Its location by the sea or nearby 3.76 0.99 3.63 1.03 0.25
Its location in the golf course or nearby 2.36 1.16 2.36 1.14 0.98
Near by working place 2.69 1.16 3.26 1.04 0.00*
Near by community and shopping mall 3.11 1.01 3.10 0.95 0.95
The convenience of transportation 3.29 1.11 3.16 1.06 0.28
Total 3.04 3.10

Promotion

Sale promotion ex: discount, gift voucher etc 2.52 1.15 2.58 1.05 0.60
Advertising sign 2.61 1.05 2.46 1.00 0.16
Knowledge and presentation from sale
3.20 1.12 3.34 1.16 0.25
representative
Advertising on newspaper 2.74 1.08 2.66 0.99 0.45
Website promotion 3.04 1.10 2.93 1.06 0.33
Total 2.82 2.79

51
Manat Chaisawat, Oraphan Tungsomboon

Marketing mix elements Long stay tourist Expatriate Sig.

Mean SD Mean SD level

People
Efficient/courteous service staff 3.71 0.98 4.03 0.84 0.00
Convenience in contacting staff 3.78 0.94 4.00 0.86 0.02
Easy communication with staff 3.87 0.88 4.15 0.86 0.00
Total 3.79 4.06
Physical Evidence
Atmosphere around property and surounding
4.10 0.81 4.35 0.76 0.00*

General appearance of the property 3.99 0.79 4.26 0.76 0.00*

Total 4.01 4.31
Process
Cleaning service provided 3.19 1.13 3.20 1.15 0.96
Security service provided 3.60 0.99 3.61 1.06 0.90
Availability of service/maintenance 3.39 0.99 3.57 1.00 0.08
Spaces common area 3.11 0.97 3.22 0.99 0.30
Additional service 2.94 1.15 3.03 1.13 0.43
Total 3.25 3.33
Remark: T-test was performed to identify statistically significant differences between groups at
95% of confidence level.
Table 1: Marketing mix elements for those long stay tourists and expatriates preferred

Product: As indicated in table 1, credibility of the developer was the highest im-
portance level of product factors for expatriates with significantly difference as op-
posed to high importance level for long stay tourists in decision making to choose
real estate in Phuket.

Price: Value for money was also the highest importance level of price factors for
expatriates with significantly difference compared to long stay tourists at high level
of importance.

Place: Its location by the sea or nearby was at high important level in both long
stay tourists and expatriates for choosing the real estate in Phuket.

Promotion: Promotion was rated at a moderate level of importance for both

groups.

People: The average importance level of people factors for both groups was rated
at high level, but the opinion was significantly difference between two groups.

52
 Real estate market for long stay tourists and expatriates in Phuket

Physical evidence: Expatriates gave the highest importance level to physical evi-
dence factors as opposed to high level of long stay tourists’ opinion.

Process: The moderate level of importance was rated for both long stay tourists
and expatriates regarding to process marketing element and there was no signifi-
cantly difference among two groups.

The relationship between important level of marketing mix factors (7Ps) and
demographic variables

By using Chi-Square test and one way ANOVA at 0.05 significance level, we
found that there were 9 cases of significantly difference as follow:

1. Female long stay tourists gave high important level to place than male at
moderate level.
2. Expatriates female rated price, place, person, and physical evidence at the
highest importance level than male.
3. Long stay tourists who are between 31–41 years old rated place at high
importance level more than other age groups.
4. Expatriate who is between 51–60 years old rated product at the highest
importance level more than other age groups.
5. Expatriate who is between 41–50 years old rated price at high importance level
more than other age groups.
6. Married long stay tourists gave high importance level to price more than other
marital status groups.
7. Long stay tourists who earn income per year more than USD 70,001 gave the
highest importance level to product factors more than other income groups.
8. Expatriates who earn income per year more than USD 70,001 gave the highest
importance level to product factors, physical evidence factors, and process
factors significantly difference more than other income groups.
9. Expatriate from Oceania rated product and physical evidence at the highest
importance level more than other nationalities.

4.2 The real estate developers

The findings from the 44 real estate developers as indicated in figure 2, we found
that many real estate projects are located at Kamala, Chengtalay and Surin, Phuket
town, and Kathu areas. The majority type of properties is a single house and a Villa
home (72.27%). More than half of the qualified real estate developments have
modern architecture style. Most of the development employed their advertisement
method by attending property shows and utilizing Internet channel.

53
Manat Chaisawat, Oraphan Tungsomboon

Marketing mix elements Mean Std. Level of

importance
Product
Credibility of the developer 4.59 0.62 The highest
Layout of the house 4.02 0.79 High
Interior design 3.98 1.00 High
Space in each room 3.89 0.75 High
Enough parking 3.86 0.90 High
Overall size of the house 3.80 0.76 High
Own garden area 3.64 1.06 High
Telephone line 3.59 0.79 High
House inc. swimming pool 3.48 1.30 High
Average 3.87 High
Price
Value for money 4.68 0.56 The highest
Favorable payment term 3.80 0.82 High
Availability of finance 3.77 1.01 High
Electric and water rate 3.30 0.79 Moderate
Average 3.89 High
Place
The convenience of transportation 4.02 0.93 High
Its location by the sea or nearby 3.93 0.95 High
Near by community and shopping mall 3.57 0.93 High
Near by working place 3.43 0.85 High
Its location in the golf course or nearby 2.98 1.05 Moderate
Average 3.59 High
Promotion
Knowledge and presentation from sale representative 4.23 0.74 The highest
Website promotion 3.89 1.02 High
Advertising sign 3.64 0.94 High
Sale promotion 3.50 1.05 High
Advertising on newspaper 3.23 1.05 Moderate
Average 3.70 High
People
Efficient/courteous service staff 4.48 0.63 The highest
Convenience in contacting staff 4.39 0.72 The highest
Foreign language speaking staff 4.32 0.71 The highest
Average 4.40 The highest

54
 Real estate market for long stay tourists and expatriates in Phuket

Marketing mix elements Mean Std. Level of

importance
Physical Evidence
General appearance of the property 4.61 0.54 The highest
Atmosphere around the property 4.39 0.69 The highest
Average 4.50 The highest
Process
Security service provided 4.45 0.66 The highest
Additional service 4.09 0.96 High
Spaces common area 4.09 0.77 High
Availability of service/maintenance 4.05 0.83 High
Cleaning service provided 3.89 1.02 High
Average 4.11 High

Table 2: Marketing mix elements for real estate develops paid attention

All of the marketing mix elements were rated by real estate developers at high
level, except people and physical evidence factors at the highest level. Within each
marketing mix, some variables were rated at the highest level. For example: “credi-
bility of the developer for product factor; money value for price factor; knowledge
and presentation from the sale representative for promotion factor“. All variables of
people and physical evidence factors were rated at the highest level of significance
for real estate developers. Security service provided in process of marketing ele-
ment was rated at the highest level of significance.

5 Discussion and recommendation

To investigate in the market of real estate for long stay tourists and expatriates in
Phuket and to identify the factors influencing the decision making process of long
stay tourists and expatriates in Phuket as follow.

From the findings, the key target markets were people mostly over 41 years old
(65.99%) and partly below 30 years old (19.73%) as well as unemployed/retired
accounted for 41.50% of long stay tourists, the same findings of previous studies
(Mill & Morrison, 1992; Natthakan, 2005), but not the same as Kasikorn Research
Center survey (2006) indicated that most people, who want to have their own resi-
dences, are age between 25–30 and 31–40 years, representing 38.9 and 35.7% re-
spectively. The majority of long stay tourists and expatriates live in Rawai and
Chalong areas because they are more quiet place than near by the beach and other
parts of Phuket. The most preferable place to stay for long stay tourist is still Rawai
and Chalong areas, whereas, expatriates thought that the most desirable place to
stay nowadays is Kamala and Surin area.

55
Manat Chaisawat, Oraphan Tungsomboon

The key factor for purchasing decision is location of projects. Long stay tourists
would like to stay closer to the beach, so they can be more relax, whereas, expatri-
ates would like to stay close to their working place to avoid the traffic problem.

The favourite style of architecture for both groups is Thai style. The majority of
long stay tourists and expatriates pay for their accommodation less than Bt 15,000
per month. Most of them stay in the apartment or rental house whereas 53% of ex-
patriates have already purchased a house in Phuket. Most of them are the company
owners who have their income of over USD 70,000 per year. The findings found
that the most effective methods of promotion were a word of mouth from their
friends and relatives and by driving around.

From the findings, we found that product, price, people, marketing mix factors we-
re rated at high level of significance for both long stay tourists and expatriates in
choosing real estate in Phuket. Physical evidence was rated at the highest impor-
tance level for expatriates as opposed to long stay tourists at high important level.
Place, promotion, and process were also rated at moderate level for both groups.
These findings are similar with the previous studies of Patcha (2005) and Tanom
(2004) that price, product, but not place, were factors influencing high class and
medium class income groups in choosing the apartment in Kathu and Bangkok.

Moreover, the study showed that there were statistically significant difference in
the preferences of expatriates over long stay tourists at the highest importance level
in “creditability of the developer“, “value for money“, “atmosphere around the
property and surrounding“, and “general appearance of the property“. Most of them
thought that the project with high credibility was more reliable and secure their in-
vestment.

Both long stay tourists and expatriates rated product factor at high importance le-
vel but expatriates gave the level of high importance at statistically significant dif-
ference with some product elements more than long stay tourists, i.e., interior de-
sign, overall size of the accommodation, space in each room, and own garden area.
The other elements of place and people factors also indicated that expatriates em-
pasized the level of importance more than long stay tourists statistically with a sig-
nificant difference. Those element are “Near by working place“, “Efficiency/ cour-
teous service staff“, “Convenience in contacting staff“, “Easy communication with
staff“.

56
 Real estate market for long stay tourists and expatriates in Phuket

We can conclude from the findings that both long stay tourists and expatriates gave
priority of marketing mix factors in the same order but expatriates emphasized
more on the level of importance as of physical evidence, people, product, price,
process, place, and promotion respectively. Natthakan (2005) stated that sea, sun
and sand have always been popular with the international tourists, especially snow-
birds group who come from cold countries during their winter season. One of the
latest major growth markets are the USA and northern Europe who were inspired
by climatic motivation which normally are dominated by older people.

The input from the study is to effectively develop marketing strategies for long
stay tourists and expatriates from the perspective of property developers.

The market opportunities for both long stay tourists and expatriates in Phuket are in
the high-end property development but from the findings it clearly seperated into
2 segments, lower high-end for long stay tourists and and upper high-end for ex-
patriates. The following elements of marketing mix define of these two target mar-
kets.
1. Location: Kamala, Surin and Chergtalay are the preferable areas for expatriates
compared to long stay tourists at Chalong and Rawai areas.
2. The most effective method of promotion for both groups are word of mouth
from their friends and family, Internet and driving around by themselves.
3. The 7 marketing mix factors were ranked in the same order for both long stay
tourists and expatriates but differ in the degree of the level of importance as
aforementioned, specifically physical evidence elements were rated at the
highest importance level for expatriates.
4. “Value for money“ is the most important element in price factor for both long
stay tourists and expatriates. The implication for this factor is the quality of
products must go in line with price.
5. People factor ranked second for both long stay tourists and expatriates. So it
requires more efficient/courteous service staff with proficiency in related
languages of target groups.

57
Manat Chaisawat, Oraphan Tungsomboon

6 Recommendation
Phuket is an island with an intensive tourism development and tourism activities.
As a result, it often has very quick and severe impacts on its natural resources.
Phuket has started experiencing the pollution from dumping of solid and liquid
wastes and the problem of freshwater shortages during high tourism season. If
Phuket keeps growing with the high volume of tourist arrivals, its social carrying
capacity will quickly reach the limits including overcrowding of beaches, noise pol-
lution and exacerbating traffic congestion. It is recommended that both long stay
tourist and expatriate target groups should be supported as a niche market to attract
small volume and high spending of the visitors to Phuket in the long run.

In terms of marketing strategies for long stay tourists and expatriates, the target
markets should be clearly identified with different marketing mix elements to be
developed.

58
 Real estate market for long stay tourists and expatriates in Phuket

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Chambers, E. R. and Lewis, C. R. (2000). Marketing leadership in Hospitality. New York, United
State of America: John Wiley & Sons, Inc.
Chon, K. and Sparrowe, R. (2000). Welcome to Hospitality: An Introduction. Second Edition.
New York, United State of America: Delmar Thomson Learning.
Expat communities in Phuket. (n.d.). Retrieved November 16, 2006, from
http://www.expat.com/communities/phuket.
Hotels’ Investment Outlook. September 2007, Volume 10, No.3.
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Prince of Songkla University, Phuket campus. (unpublished)
MCOT (2006, October 31) Housing market still has room to grow.
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Mill, Robert C. and Morrison, Alastair M. (1992). The touris system, 2nd ed. USA: Prentice-Hall.
Panvuchatkul, Patcha. (2005). The factor influence to choose the apartment in Phuket. Master
degree thesis, Prince of Songkla University, Phuket campus. (unpublished).
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59
 Section 2:
Evolving Destination Market
Business Models

61
 Low cost tourism and real estate demand

Andrea Macchiavelli & Lara Cinesi

Abstract
This paper deals with the relation between the development of low-cost flights and
the purchase of holiday homes by foreign people, with reference to the Italian situa-
tion, where the phenomenon is very recent and not yet investigated.

The lack of specific data that would allow connecting the two phenomena, isolating
them from others involved, suggested to proceed by subsequent steps, analysing:
a) the profile and behaviour of low-cost passengers and the impact on the tourism
development of a destination;
b) the foreign people that own a house in Italy, trying to identify the reason that
led to this choice and thus to the development of a leisure tourism related to the
ownership of holiday house;
c) the features of the tourist real estate market;
d) the relation between low-cost flights and the purchase of real estate properties
by foreigners, through a survey on a sample of real estate agencies.

This analysis allows to point out that there is a significant relation between the two
phenomena, especially in some areas of the country, and to identify the main char-
acteristics of this relation.

Keywords: Low cost, holiday houses, real estate tourist market, ownership of
holiday homes

1 Introduction
Low cost air travel has rapidly spread all over Europe, causing deep changes in the
management and in the economic balance of airlines and leading to an evident de-
crease of the price of travel. On the demand-side, these conditions contributed to a
significant change in the way of travelling, fostering an increasing aircraft utiliza-
tion and a greater ease of transfers within the main European cities, even for short
trips. In Italy short holidays (less than 4 days) have rapidly spread: in 1997 they
were 23.2 million, in 2007 43.7 million, and in 2010 50 million holidays are ex-
pected to be reached and perhaps exceeded (Mazzà 2008).

63
Andrea Macchiavelli, Lara Cinesi

This is obviously related to the development of low fare carriers, although some
other factors can work together. Some well known tourist destinations have seen a
significant growth in the number of tourist nights as a result of new flows of tour-
ists willing to stay in the territory. Other areas, served by secondary airports with
low traffic, have identified low cost flights as an opportunity for development and
have strongly encouraged low cost carriers to choose their airport as a destination,
even financing them. The spread of low cost flights produced a strong competition
between many Italian airports (often with low passenger traffic), but it has also
given the opportunity to reach, cheaply, those destinations which were almost un-
reachable due to their distance from the main routes.

Using different sources, this paper aims at investigating the relation between the
availability of low cost flights and the ownership of holiday homes by foreign own-
ers. This is a well known phenomenon, frequently pointed out by tour operators and
real estate agents, for which, however, quantitative data is not yet available. For the
research, all sources had been taken into consideration; however, an objective
quantification resulted non to be possible, due to lack of statistical data on the sub-
ject1. Nevertheless, the survey on a sample of real estate agencies helped to collect
useful information to understand the dimension of the phenomenon in some areas
of the country.

2 Low cost travellers and holiday property

2.1 Low cost traveller profile

The profile of low cost traveller has not yet been well examined (Sigala & Baum
2004). There’s no doubt that this tourist has some features that make him different
from the traditional air passenger, not only because he travels at a lower price and
with less comfort (no frill on board, longer distance between the airport and the fi-
nal destination, not frequent means of transport, unsecured refund, etc.), but mainly
because he has a different concept of travelling. He is in fact ready to accept par-
ticular terms imposed by the carrier, which he normally would not choose, as a
compensation for the cheap price of the ticket. The development of low cost air-
lines has partly influenced all passengers’ way of travelling, even those who use the
traditional airlines. The policy of low cost carriers forced the traditional airlines to
review their business strategies, in order to be competitive at least for some seg-
ments of the air transport market (Baccelli & Senn 2004).

___________________
1
For instance, the number of foreigners owning a second home in Italy is not available.

64
 Low cost tourism and real estate demand

This has produced a change in the travel patterns of all passengers, so that it is be-
ing asking if the low cost airlines will remain a limited segment or if they will con-
tinue to condition the evolution of the entire air transport system and therefore to
standardize passengers’ behaviour.

An analysis carried out on the passengers at Bergamo-Orio al Serio2 airport, under-

lines some features of the low cost flyer (Macchiavelli 2007). The most significant
findings, concerning 2006, are summarised as follows3:
– Most of travellers (58,1%) use low-cost flights for leisure purposes, but there
are also other significant shares to be considered: 12,9% of the passengers are
business travellers, 12,8% visit relatives and friends, 9,2% are students in Italy
for a study trip (and the remaining for other reasons).
– Only a minority of tourists has its final destination where the airport is located.
In our case about 12% of the total passengers stay overnights in Bergamo and
33% in Milan. This means that low cost flights are mainly used for their cheap
price, and more distant destinations are reached also through other means of
transport.
– The average expenditure on the territory of a low-cost passenger is not much
different from the one of a traditional foreign tourist in Italy. In 2006, in fact,
the daily average per capita spending for foreign passengers at Orio al Serio
airport was EUR 78.7, only 10% less than the average spending of the foreign
tourists in Italy.

This information seems to support the hypothesis of a tourist who uses the low cost
flight to save on the fare price, but who afterwards behaves similarly to a traditional
foreign traveller. In principle, this interpretation can be considered good, but as a
matter of fact, a deeper analysis reveals strong market segmentation. We can con-
sider the flows from the three main countries connected to the airport of Orio al Se-
rio by low cost flights: Great Britain (37.1% of foreign low-cost passengers), Spain
(18.9%) and Germany (10%) and particularly we can consider some features of
these passengers or their behaviour:

___________________
2
The analysis has been carried out extracting the interviews to the passengers landed by low
cost flights from the Survey on International Tourism conducted by “Ufficio Italiano dei
Cambi” (nowadays named Bank of Italy) on a sample of 2500 foreign tourist in 2006.
3
The analysis has been carried out extracting the interviews to the passengers landed by low
cost flights from the Survey on International Tourism conducted by “Ufficio Italiano dei
Cambi” (nowadays named Bank of Italy) on a sample of 2500 foreign tourist in 2006.

65
Andrea Macchiavelli, Lara Cinesi

GB D E
Daily average per capita expenditure € 110 € 90 € 42
Holiday as a reason for the travel 71% 69% 45%
Travellers over 45 years old 37% 23% 9%
Average stay in Italy 4.2 ds. 3.9 ds. 7.1 ds
Travellers who choose a tourist package 9% 1% 1%
Overnight stays in hotel 68% 63% 39%

Table 1: Characteristics of passengers coming from the 3 main countries to Orio al Serio
airport 2006
Source: Elaboration based on the survey on international tourism conducted by the Bank of Italy

The data show that the English traveller and the Spanish one have a very different
profile. On average the first one is older, he comes to Italy mainly for leisure pur-
poses and his average stay is very short. He stays overnight mainly in hotel and, as
a consequence, he spends daily a high amount of money (higher than the average
amount spent by English tourists in Italy!); few of them bought a tourist package
(anyway their share is higher than other travellers). Conversely, the Spanish tourist
is younger on average, leisure is not his main purpose (many of them come to study
or to meet relatives and friends), he does not spend the night in a hotel and, as a
consequence, spends a lower amount of money (about 1/3 as regards the English
tourist!). The German tourist is placed between the English and the Spanish one,
but his behaviour is more similar to that of the English tourist rather than the Span-
ish one.

In this case we considered the country of origin, but several different behaviours
could be analysed in relation to the purpose of the travel or to the age. All this leads
to the conclusion that the demand for low-cost flights cannot be considered homo-
geneous, but is indeed characterized by significant differences.

The English tourist uses a low-cost flight mainly to save on the ticket price, but he
does not show a different behaviour in comparison of traditional tourist. In this case
the polarisation of consumption – phenomenon pointed out by many sociologists -
would be emphasized: the consumer tends to save on some services, in order to be
able to spend more for others. (Gaggi & Narduzzi 2006)

The spending power of the Spanish tourist is different, and he probably would not
have travelled if he had not had the opportunity to use a low-cost flight. He is a
“new” tourist, led to travel by the low-cost of the ticket.

66
 Low cost tourism and real estate demand

The lack of knowledge about the area where the airport is located is a characteristic
of most travellers, when the destination is not already known by personal reasons.
In a survey carried out on the passengers at the airport of Orio al Serio, a specific
question on the knowledge of Bergamo4 as a tourist city was asked: only 40% of
the sample gave a positive answer, 24% knew Bergamo only as an industrial centre,
while 36% considered it within the peripheral area of Milan. It is therefore con-
firmed what was supposed by Sigala e Baum (2004): “low cost air travel contrib-
uted significantly to the casualisation of travel”.

2.2 European tourists, air travel and holiday home in Italy

A holiday home in a tourist destination is popular in the Italian high and middle
class. According to the Italian National Institute of Statistics (ISTAT) annual sur-
vey, the Italians who spend holiday in their own second home were 12,3%, while
33,4% found an accommodation at their relatives and friends (2007 data). It should
be underlined however that many second home owners do not inhabit their tourist
house during the holiday. The ownership of second home in Italy has always con-
cerned almost exclusively Italian people; the property as holiday destination is typi-
cal of the domestic demand and it normally affects an area not too far from the
main residence. The exception concerns emigrants, who usually belong to the older
generations; in fact there are many people who use to spend holidays in their native
country in order to meet relatives and friends, even though they have been living
abroad for many years. This is particularly evident in the southern regions of the
country, from which many people emigrated in the past (Sicilia, Abruzzo, Puglia
and others.).

Nevertheless, during the last decades, foreigners showed an interest in purchasing a

holiday home in Italy. This trend has been noticed:
a. in border regions, for tourists from the neighbouring countries. They are en-
couraged by the familiarity with the language, and, above all, by the closeness to
the tourist destination, which allows a more frequent use of the house all year
around (e.g. Piemonte and Liguria for the French or Lombardia for Swiss);
b. In some regions with very important tourist attractions, (e.g. Tuscany, Umbria or
the lakes in the north) even for the tourists coming from far countries (mainly
Americans, English or Germans), who spend some periods of the years in these
places, attracted by the interest of the place. Generally, this kind of demand is in
terested in a particular type of dwelling, connected to the cultural identity of the
destination. Recently, for instance, there has been a strong increase in the de
mand for “Trulli” (typical house of Puglia) by foreign tourists.

___________________
4
Bergamo is a city characterised by remarkable cultural and landscape resources, with about
120,000 inhabitants.

67
Andrea Macchiavelli, Lara Cinesi

The survey on international tourism carried out by the Bank of Italy allows having
some indication about the propensity of foreign tourists to use a property in Italy5.
According to the survey results, the arrivals would amount to about 347 thousand,
equivalent to 0.8% of foreign tourists arriving in Italy6. In order to analyse the phe-
nomenon of foreign home owners and its connection with the development of low-
cost flights, with the aim of purifying data from elements related to emigration, we
choose to focus on a restricted sample of nine countries, eight European (Belgium,
France, Germany, Netherlands, Great Britain, Spain, Sweden, and Switzerland)
plus the United States.

These are the countries that provide the most important tourist flows to Italy and, at
the same time, where people show an interest in a second home. This share of for-
eign tourists coming from the main countries represents approximately 75% of total
arrivals of the foreigners that own a house in Italy (about 333thousand) and 67% in
term of nights (about 5,8 million). These tourists have the following features:
– Most of them are in their working age or, at least, young retired people
(40.6% are more than 45 years old, but only 8.2% over 65);
– 67.7% of them come from just 3 countries: Great Britain (28.6%), Germany
(26.6%) and United States of America (12.5%);
– They have an average stay per trip of 14.3 days, which shows a propensity to
stay not only as a tourist;
– The daily average spending per capita is EUR 39.1: this highlights a behaviour
without many transfers;
– The distribution among the Italian regions is summarised as follows :

Sicilia 15,6% Puglia 5,9%

Lazio 12,9% Sardegna 4,9%
Toscana 12,2% Abruzzo 4,1%
Lombardia 10,4% Marche 3,2%
Campania 7,5% Others 16,4%
Veneto 6,9% TOTAL 100,0%

Table 2: Air arrivals of foreigners who own a house in Italy .The percentage concerns the first
10 regions

___________________
5
Data are referred exclusively to foreign tourists, coming to Italy by plane (so the movements
on the border are excluded) and who spend a period in their property
6 Since the sample used for this survey consists in 650 cases only, we preferred not to reduce it
further (for instance, by considering only those who travel for leisure purposes), in order to
hold its significance.

68
 Low cost tourism and real estate demand

Even though these regions are the biggest ones, this classification is completely dif-
ferent from the one concerning the foreign tourist in Italy as a whole: in this case 5
regions of South of Italy are involved (in the total classification there is only 1
southern region!). This is a clear sign of the relation with the emigration. Figures
concerning the relation between countries of origin and regions of destination help
to explain the phenomenon, but since the sample is rather modest, we prefer to use
them only as a general trend. On the basis of all the available information, we can
recognize three kinds of tourists who are owners of a house in Italy, with the fol-
lowing characteristics:

Tourist typology Characteristics

Return Tourists Emmigrants returning to their countries of origin. The
most of them come from Germany, France and Switzer-
land and they are heading for the South of the country
(mainly for Sicily).
Business travellers All those who are related to Italy for working or istitu-
tional reasons. They come from different countries, but
the Americans have a high share. They travel mainly to
Lombardy and Latium (Rome)
Leisure travellers Tourists who bought a house for leisure purposes. The
main flows come from Great Britain and United States
and are heading for Tuscany, Latium (Rome) and Veneto
(Venice)

In conclusion, the purchase of real estate for tourist use by the foreign people who
do not live on the outskirts (and consequently air travellers) is behaviour that exists,
but is also a behaviour which frequently hides different relations with the land.

3 The tourist real estate market in Italy

3.1 Features and trends
Italy has a high density of residential building on a territory that cannot be com-
pletely used, because of the significant presence of mountains. In the areas suitable
for construction there are industrial activities, residential areas as well as tourist re-
sorts, all highly developed. Also for this reason real estate tends to be “tense”, and
pushes towards high prices, which affect the other form of tourist accommodation
(for example, hotels’ prices are generally higher than in other countries).

In the housing market the phenomenon of holiday homes is, as already noted,
widely spread. In 2004 second homes in Italy were estimated to be 3 million
(Becheri et al. 2005; p. 41).

69
Andrea Macchiavelli, Lara Cinesi

Houses used mainly for leisure purposes, are generally located in tourist regions not
far from large urban areas (Macchiavelli 2007). The greatest concentrations are re-
corded in the mountain areas of Val d’Aosta, Piemont and Lombardy (nearby the
urban areas of Turin and Milan) and in the coastal areas of Veneto, Tuscany and
Latium (regions with a high urban density).

However, only a minority of these houses are available for renting. Rental houses
are usually owned by residents and were built with the specific purpose to be let, in
order to generate an additional income for the owner. Conversely, for houses
owned by non-residents, the willingness to let out is very low, differently from
Britain, where about 20% of second homes’ owners, give their house for rent
(Brackembury 2007), but similarly to what happens in Switzerland, where 97% of
the holiday homes’ owners are “unwilling to rent their second home” (Bieger,
Beritelli, & Weinert, R, 2007)

During the last years the price of tourist houses has remained high (fig.1), despite
an increase in the supply and a stability in the level of sales (Nomisma 2007). As a
rule, in Italy there are two kinds of market: the first one is the market for luxury
houses, characterised by an extremely inelastic demand, willing to pay even 30-
40% over the market price for a house in an exclusive resort. The second one is the
middle market which continues to attract investors, even thought the prices are con-
tinuously increasing.

(+5.4% = Località Marine, +4.5% = Località Montane)

Figure 1: Evolution of the change of prices related to the purchase of holiday homes in the main
Italian tourist destinations

70
 Low cost tourism and real estate demand

The reasons that lead to the purchase of a holiday property are the same in all the
high-income countries: the attractiveness of the resort, the availability of a “refuge”
suitable for one’s personal needs, the prestige of owning and showing a property
(Keller 2007). Nevertheless, with regard to the Italian situation, it is remarkable
that the second home also represents an important form of family investment, espe-
cially in periods of great economic uncertainty or high inflation. This explains why
many holiday houses remain totally vacant during the year or are used only during
the very peak season, with the result of weakening the entire destination, because of
a lack of tourist demand (Macchiavelli 2007). The phenomenon of “cold beds”
characterises most of the countries with a high concentration of second homes, and
it is so widespread that the Local Municipalities of some tourist destinations forced
(through special agreements), the owners to rent their houses for some months in
the year (Williams 2007).

For what concerns foreign tourists, the factors that lead to the purchase of a second
home are related to climate, landscape and cultural aspects. In Spain, a country with
optimal climatic conditions, there has been a strong increase of the tourist real es-
tate stock, in its different forms (apartments, residences, time sharing etc.).

Presently foreigners account for 39% of second homes market of the country, and
more than 60% of them come from Great Britain and Germany. However, even in
the case of foreigners, the problem of “cold beds” is still relevant, since in Spain
the average occupancy rate is only 17 days per year (Datzira 2007).

In this context, the availability of low-cost flights can be very important, because
they can encourage a greater use of second homes utilization, although it is evident
that the main reason of this low occupancy rate should not be sough in economic
factors.

4 Low-cost flights and their impact on tourism

4.1 Low-cost flights and tourism
The relation between tourism and air transport is characterized by a mutual influ-
ence and it is too short sighted to suppose that air transport alone could determine
the characteristics and the success of a particular tourist destination (Bieger &
Wittmer 2006). Moreover, the impact on the tourism sector depends on the specific
business model adopted by the airlines, which affects in different ways both the
management strategies of the airlines themselves and the destinations served.
(Bieger, Döring & Laesser 2002).

71
Andrea Macchiavelli, Lara Cinesi

In the last years, the low-cost flight model, based on point-to-point connections,
contributed - more than other factors - to modify the tourism of some destinations
and to create significant opportunities for development in these areas, not only in
the tourist sector (Siciliano & Vismara 2007). For these reasons the partnership
with low cost carriers has been the best strategy adopted by several tourist destina-
tions to promote their development. With this aim they provided financial incen-
tives to the low cost airlines, eluding several U.E. restrictions on these types of
transactions. Of course in these areas, the low-cost transport becomes a powerful
tool for territorial marketing.

Low-cost air transport has however some peculiarities and its effects are not yet
well known. The effects are probably not the same for all the destinations and de-
pend to a great extend on the characteristics of the tourism developed in the territo-
ries served, by low cost carriers, on the characteristics of the countries from which
the main flows are originated ( the behaviour of English and Spanish tourists in
Bergamo, is not accidental, but reflects the history of outgoing tourism in these
countries), and, finally, on some operational conditions of the airport (slot, frequen-
cies, etc).

The various effects of tourism on the territory imply different strategic approaches
to the local tourist policy as well as a change in the previous promotional strate-
gies. This is one of the main problems that have to be solved at local level. It is well
known that, most of the low-cost carriers are based in secondary airports, often lo-
cated in non-tourist areas, however, with a lack of organization capability. Policy
makers in the tourist destination are often disoriented and do not realize the signifi-
cance of this phenomenon; consequently they have some difficulties in im-
plementing some appropriate policies and in giving up the previous one.

On the basis of the knowledge acquired with several analysis – particularly at the
Bergamo airport – we can highlight the following aspects of the relation between
low cost flights and tourism:

1. The development of low-cost carriers caused an evident increase in the number

of air passengers in Italy. In 2005, year without a growth in total tourist arrivals,
CISET estimated that the total number of passengers increase by 9%, hauled by
an increase of 19% in the number of low-cost passengers (Minghetti 2006). The
Orio al Serio airport, served mainly by low-cost carriers, at the end of 2007
reached 5,8 million passengers, with connections to 75 destination (in 2001
there were only 14); Pisa airport, another low-cost related airport, reached 3,2
million passengers, with 48 destinations

72
 Low cost tourism and real estate demand

2. At the beginning, passengers are not aware of the characteristics of the place
where they have landed, and sometimes they expect to arrive in a totally
different site. It is well known that the word-of-mouth advertising is the most
effective way to promote a destination and it is exactly what happened in the
case of Bergamo; the airport has seen a significant increase in the tourist flows,
thanks to the promotion carried out by the tourists themselves. Generally, this
little knowledge of the destination by the tourists can have some positive
implication for the local tourism system, since tourists have fewer expectations
and can be better oriented on the territory. But this also requires more
initiatives, and specific promotions targeted to the countries of origin of the
tourists.
3. Tourists often use a low-cost flight for a short holiday; for this reason they have
short time available and are willing to be oriented. This means that the
organizing capability of the local tourism system can become a crucial variable
for the success of a tourist destination, in comparison with other competitors.
An area served by low-cost carriers needs an efficient organisation, so as to
reduce the waiting periods and offer an integrated tourist product to the
traveller. Destination Management is therefore essential.
4. Low-cost tourists obtain information and manage their trip, using the Internet.
Among the foreign passengers arriving in Bergamo, only 4% bought a tourist
package. This means that the tourist supply can reach the travellers mainly by
three channels: the Internet, the flight (and therefore the airline with its
communication channels), and the airports (departure and arrivals). This
condition requires a revision of the policies and especially of marketing and
promotion strategies; investments in fairs and intermediation services become
less important that the ones for on line advertising and airports.
5. As Valls already pointed out, it is surely true that the use of low-cost flights
”increase the power of consumers in the make-up the tourist prices” and that
the low fare of the flight tends to contaminate other tourist sub sectors (Valls
2005). In Bergamo, for example, low-cost tourism lead to the development of
new forms of accommodation, with more accessible prices for leisure tourists
(Bergamo was mainly a business tourism destination); from 2002 to 2007 the
number of Bed & Breakfast rose from 18 to112 and new 3-star hotels were
opened. In any case, the tourist market is rather segmented (see point 2.1
above), and the approach to this form of tourism should consider all the
different segments.

73
Andrea Macchiavelli, Lara Cinesi

4.2 Low-cost flights and the purchase of holiday houses

It is well known and widely reported that the presence of a low cost airport can en-
courage the purchase of leisure properties. Bieger & Wittmer (2006) identify in the
low-cost business model, a preferential relation with the tourist areas are affected
by a great concentration of second homes, stressing that “destinations with a large
number of decentralised managed second homes, and thus a need of flexible traffic
connections, provide a good market for LLCs”( pag.9).

With the aim of quantify the relation between some Italian airports and the pres-
ence of second homes used for holiday, we decided, in the lack of statistical data
that allow to link the two phenomena, to conduct a direct survey on a sample of real
estate agencies. The method adopted was the following:

a) We selected only destinations with the following features:

– presence of an airport served by a significant numbers of low-cost flights
(with more than 200.000 low-cost passengers per year)
– presence of tourist attractiveness in the area;

The main airports of Milan and Rome were excluded from the analysis, due to the
problems in discriminating the second homes from other types of accommodation.
A total of 22 areas were considered.

b) A short questionnaire with six questions was prepared, in order to detect:

– the presence of demand for holiday property in the area expressed by for
eign customers;
– the activity of real estate agencies with foreign customers;
– the incidence of low-cost flights on the purchase of holiday houses by
foreign customers;
Further information about the size of the real estate agency in terms of offices, em-
ployees and salesmen was also asked, in order to weight the collected data accord-
ing the size of each agency.
c) Questionnaires were sent via e-mail to more than 600 real estate agencies. After
a number of reminders, 120 useful questionnaires were collected. The size of
the sample suggested to avoid any territorial analysis and to process the data as
a whole.
d) Most of the respondent agencies were small-sized (as it is typical in every re-
gion of Italy): each agency has an average of 1.2 offices and 4.2 person em-
ployed (employees and collaborators).

74
 Low cost tourism and real estate demand

The most significant findings of this research can be summarised as follows:

– Almost 75% of the surveyed agencies believes that in their operating area there
is an actual relation between the purchase of second homes by foreigners and
the availability of low-cost flights at their airport of reference;
– 55,8% of the agencies declare to have foreigner customers. On the a whole,
foreign customers are estimated account for 20% of total customers;
– 46,8 % of the agencies believe that there is a relation between its own foreign
clients and low-cost flights. This means that over 83% of the agencies with
foreign customers believe that the foreign customers are related with low-cost
flights;
– The incidence of this relation as is shown in Figure 2. More than 15% of real
estate agencies consider that the “dependency” of the foreign market d on low
cost flights is greater than 50%. It should be underlined that such a strong
relation has been recorded in the areas of Sassari/ Alghero (tourist area of
Sardinia), Pisa, Ancona (on the Adriatic coast), Brescia (Garda Lake) and
Perugia.

6.7%
9.2%
5.8%

53.3%
14.2%

10.8%

none <10% 10-30% 30-50% 50-80% >80%

Figure 2: Purchases of second homes by foreigners, according to real estates agents:

dependence on low cost flights

75
Andrea Macchiavelli, Lara Cinesi

On the basis of the statements of the agencies, the foreign buyers come from the
following countries7:

Countries of origin % Countries of origin %

Great Britain 43,7 USA 4,7
Germany 19,3 Netherlands 3,8
France 8,1 Switzerland 2,6
Russia 6,9 Others 10,9

Essentially the survey results showed that in Italy the relation between the avail-
ability of low-cost flights and the purchase of leisure estate properties by foreigners
actually exists and concerns mainly English tourists. This could be due to a higher
purchase power compared with other European countries. All the tourist areas are,
in different ways, affected by this phenomenon, which is however particularly sig-
nificant in Tuscany, Sardinia, and on the Tyrrhenian and Adriatic coast. The dia-
logue with the real estate agencies has also shown that in some areas (mostly in
Tuscany) there is a notable demand for luxury residence. Russians tourists repre-
sent the emerging market in this particular sector and their presence is noticed in
several regions.

5 Conclusions and directions for further research

With the contribution of different sources, the analysis revealed the existence of a
relation between the development of low-cost flights and the increase in the number
of second homes owned by foreigners. This phenomenon is certainly perceived by
real estate agents and, in some areas, it appears to be significant. On the basis of the
information collected it can be concluded that:
a. This phenomenon contributes to keep the prices of leisure estate properties high
(if not increase them).
b. Since this is an incremental demand, it is realistic to expect that it will stimu-
late Local Municipalities (always in need of tax revenue) to promote the con-
struction of new tourist buildings.
c. In those areas where the interest of foreign tourists in real estate properties is
booming (e.g. Alghero-Sassari), the tourist demand is changing.
d. The low utilisation of the holiday house owned by foreigners, will contribute to
the phenomenon of “cold beds”, with its negative impact on the tourist destina-
tion.

___________________
7
The reported data are weight on agencies’ size

76
 Low cost tourism and real estate demand

The situation is also strongly influenced by the development of air transport and its
costs. The sharp increase in the cost of fuel together with a possible taxation on air
transport, (aimed at reducing the negative effects on the environment) could lead to
an increase in the fare and thus to a reduction in the use of aircraft for unnecessary
purposes.

Since this is a topic still not deeply investigated, there could be many further direc-
tions for research. In our opinion the most important subjects are:
– The quantification of the phenomenon, by better isolating the leisure
component. If the analysis at national level should not be possible, it would be
interesting to analyse the situation at local level, with some case studies;
– An analysis of the second home owner’s behaviour, with particular reference
particularly to the use of holiday house and of the aircraft.

77
Andrea Macchiavelli, Lara Cinesi

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Minghetti, V. (2006), I turisti no frills-low fare : caratteristiche e comportamento di spesa. In: VII
Conference CISET-UIC “L’Italia e il turismo internazionale”, Venezia, slides.
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Siciliano, G., Vismara, M. (2007), Low Cost, High Value. In: La Rivista del Turismo, n. 4: 24–32.
Sigala, M., Baum, T. (2004), Low cost airlines and their impact on travel behaviour, Working
paper, Conference “ Tourism: State of the Art II” Glasgow, 27–30 June 2004.
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Valls, J. F. (2005), Impact of low cost on spanish hotel prices, Working paper, ESADE, 14th
International Tourism and Leisure Symposium, Barcelona.
Williams, P. (2007), L’immobilier de loisir : comment le problème de la sous-utilisation de
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Mountain. In: 9th Sommet’s du Tourisme, Chamonix 12–14 dec. 2007, slides.

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Dynamics of price negotiation in real estate at upscale
resorts in the Alps –
A case study of Verbier, Valais, Switzerland

Miriam Scaglione

Abstract
The evolution of real estate pricing in upscale destinations in the Alps can be stud-
ied from different points of view. It can be seen, for example, in terms of supply.
This usually gives, as the main reasons for the determination of price, the scarcity
of suitable building land, the beauty of the landscape and proximity to winter sports
installations, besides other externalities like urban planning and, specifically in the
case of Switzerland, the legislation referred to as the Lex Koller. Alternatively, it
can be seen in terms of demand: motivation for investment in real estate could be
attributed to a slower increase in the cost of property, or to the increasing economic
risks in financial markets, or simply to the pressure of inflation. Nevertheless, nei-
ther point of view, taken separately, explains one very important aspect: the dynam-
ics of the interaction of the actors in the market. The study of different market seg-
ments and the interaction between them does, however, shed light on the dynamics
of the formation of property prices.

The aim of the present research project is to take this latter approach. Firstly, the
paper describes the dynamics of pricing negotiation in real estate in Switzerland, as
presented in (Favarger & Thalmann, 2006). Secondly, it characterizes three differ-
ent market segments, or archetypes, interacting in such a market. On this basis, the
research suggests certain hypotheses about the particular features of the interaction
of these three segments. Thirdly, it tests the former hypothesis in the case study of
Verbier. Finally, the conclusion shows that the interaction of these three segments
of the market affects the formation of prices and, as a result, could be at the origin
of a price bubble. Whether the bubble is speculative or rational remains a more
open question.

Keywords: Real estate market, price bubble, fundamental value vs fair market
value, rational price bubble, cobweb phenomenon

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Miriam Scaglione

1 The price negotiation mechanism in real estate property

Real estate has particular features which differentiate it from other markets. Favar-
ger & Thalmann (2006, p. 1) list the characteristics of the components of the sup-
ply, namely properties, and the main factors in the market (table 1).

The issue of pricing in real estate markets deserves particular attention because
there are several concepts of price. The first is the fair market value, i.e. the value
for which a property could be sold in the market, which is difficult to establish. The
fair market value is hard to evaluate because, in most cases, the transaction is still
virtual and the agreed price is not yet known (cf. op. cit., p. 2). Experts in real es-
tate, therefore, have to use different methods, which give different kinds of prices.
Such methods can be divided into two main groups, depending on the estimated
value of the target: the return value, or equity value, and the intrinsic value.

Characteristics of Factors in price determination

properties
Heterogeneity
Has sub-markets

Difficult comparisons

Properties are all different
Immobility
No possibility of spatial balance

Localized markets
Intensive use of land
Constraints owing to urban planning

Scarcity of available plots of land
Lengthy production time
It is difficult for supply to meet an increase in demand

Heavy duty
Significant maintenance costs

It is very difficult (almost impossible) to adjust to lower supply
Expensive
Loan finance (importance role of international funding)

Obligatory factors
Demand relatively insensitive to pricing; high variability of

prices (in the case of primary lodging).

Table 1: Characteristics of properties and their incidence on price determination

(adaptation of the table (op. cit., p. 1), with the authorization of the authors)

Methods targeting equity value aim to estimate the return on the capital invested in
real estate, whereas intrinsic value methods aim to estimate the price of a repro-
duction of the same object after subtracting the effect of its age and corresponding
depreciation. Moreover, at least another three methods or values are available to the
expert for the same property: the insurance value, the fiscal value and the pledge
value.

As Favarger & Thalmann (2006, p. 3) point out, it is the analysis of the market and
the behaviour or interaction between the seller and the buyer that determines the
choice of the method of estimation: “If the actors in the market buy at the lowest
price or sell at the highest price possible, two identical properties ought to change
hands at the same price […] but no two properties are ever identical”.

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 Dynamics of price negotiation in real estate at upscale resorts in the Alps

This is one characteristic that makes the estimation and the negotiation process so
particular.

Whatever method of estimation is chosen, the process is carried out under the hy-
potheses, or trade-offs (box 1), which describe a set of rational features of the mar-
ket (op. cit., p. 121).

Favarger & Thalmann raise the point of alternatives available to the buyer/seller to
buying/selling the property, or even to the whole deal. This is also a universal char-
acteristic of all methods of estimation; their goal is to compare the alternatives. In
an ordinary real estate market, the buyer has more than one object in which he is in-
terested. Also, he has the option of not making any purchase at all, if there is an-
other asset that could yield a better profit than the investment in property, or at least
give the same return with the same level of risk. The analysis of all the alternatives
gives a “maximum price” the buyer will offer for the transaction. The same occurs
in the case of the seller, who is willing to hand over the property on condition of
getting a fair price (op. cit, p. 5). The seller also has alternatives to selling; for in-
stance, he can let the property. The analysis of all the alternatives gives a “mini-
mum price” for the seller for the transaction.

– There are enough potential buyers.

– The actors are fully aware of the state and the conditions of the market.
– The buyer is not compelled to sell and the buyer is not compelled to buy.
This condition is not always observed, especially on the side of the seller. A
buyer is seldom compelled to buy a specific object, but may often be com-
pelled to obtain a property.
– A reasonable time in which to conclude the transaction, usually some months,
is available.
– Actors act prudently.
– The buyer has no particular interest in the object, like i.e. buying his
childhood home.
Box 1: Elements of the trade-off hypothesis

All these elements lead to a process of negotiation. Figure 1 gives the contrasting
utility lines for buyer and seller, and helps to illustrate the process of price negotia-
tion. The diagram also helps to define the three categories of buyer.

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Miriam Scaglione

Figure 1: Contrasting buyers’ and sellers’ utility lines

Adapted from Favarger & Thalmann (2006, p. 8)

Favarger & Thalmann (2006, p. 3) describe the deal mechanism as follows. The
process begins once the seller decides to put the property up for sale, when a price
is asked for the property. The estimate is usually made by an expert. The expert es-
timates the fair market value, which at that particular moment is no more than a
probable price.

The seller then publishes a requested price, which is normally higher than the
probable one given by the expert. This requested price is the monetary compensa-
tion demanded in exchange of the property.

Nevertheless, the requested price can be different from the one that it is finally
paid. If more than one buyer accepts the requested price, the interested buyers will
probably make a higher bid. If, on the contrary, no buyer appears, then the seller
has to review the requested price downwards. In both cases, buyers show the price
that they are willing to pay for the object of the deal (in figure 1, the “proposed
price”). At that very moment when at least one buyer appears, the deal process be-
gins and the two prices, namely the one requested and the one proposed, could
vary between ranges of values. Figure 1 show the upper limit for the buyer as the
“maximum accepted price”, which comes from the analysis of the alternatives. The
same happens to the seller, who has a “minimum accepted price”. The difference
between the prices represents the real margin of negotiation. Nevertheless, the so-
called acceptable price is sometimes far from being constructed on an objective
basis: “Acceptable prices depend on the motivations of the buyers and the alterna-
tives available to them. The latter will vary in the case of the buyer and the seller,
an investor or a user…” (op. cit, p. 9)

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 Dynamics of price negotiation in real estate at upscale resorts in the Alps

The present research adds to the representation in figure 1 given by the authors
quoted by calculating the theoretical deal margins in dotted lines.

The buyer has a range limited by the “maximum accepted price” which corre-
sponds, in a rational market, to the evaluation of the alternatives, but in theory the
limit can be extended to include all his or her assets, plus the loans obtainable. The
upper limit will in any case be limited, whatever the circumstances. At the bottom
of the scale, the buyer may decide not make any deal at all, so the degree of useful-
ness will be zero. However, the case in which the buyer is looking for a first, pri-
mary home excludes the possibility of not making any deal at all, i.e. a newly mar-
ried couple must use their assets, if not to buy then at least to rent accommodation
in which to live. In this specific case, the cost of there being no deal at all is too
high and the minimum level is no longer zero, but must be higher, because the
status quo is not a solution.

The seller’s margin has, in theory, no upper limit, since the upper limit is fixed by
the market at the level of the transactions or processes into which he has to enter in
order to sell the property. The lower limit in figure 1 is zero, which represents the
degree of usefulness of not making any deal at all. Nevertheless, under certain spe-
cial situations, such as a compelling need for cash, the lower limit could result in an
application for a loan, although the status quo is not a solution.

The following section describes three different segments of the market on the basis
of the motivations that can drive demand.

2 Segments of real estate market in an upscale Alpine resort

This section proposes a segmentation of the demand market interested in individual
homes or apartments, to be acquired for personal use, at least for a short period of
the year. The properties for commercial use such as malls, restaurants, hotels, etc
are not included in this description of the market. Also, this segmentation excludes
people living permanently in the resort and looking for another property for in-
vestment purposes, e.g. in order to rent it out to visitors for shorter or longer peri-
ods. Similarly, the analysis excludes professional investors. These exclusions,
though representing a limitation, are necessary in order to produce a group which is
as homogeneous as possible in terms of the evaluation of their alternatives. Table 2
describes those segments.

The segment of people looking for a primary home must gather or mobilize capital
in order to satisfy that need. In contrast, the other two segments could leave their
assets in a different form of investment (e.g. bonds or shares) if the evaluation of
the alternatives shows that this would yield a higher return.

83
Miriam Scaglione

The alternative solutions for the first group, besides buying another property, are to
rent one in the resort or to live in a town nearby. Besides certain gratifying aspects
like living close to family and relatives, travelling time is an issue in Switzerland.
The results of a survey of over 2,000 questionnaires carried out in 1996 in a Swiss
National Research Fund project entitled “Rental and ownership, as determinants of
the status of the occupation of the household” are published in Thalmann & Favar-
ger (2002) and show that only 14.3% of respondents travel more than 30 minutes.
Nevertheless, when respondents are asked about the main factors determining the
choice of property they will buy, the duration of the trip to work is not placed at the
top of the list. Swiss people seem to give more importance to the characteristics of
the natural environment (its relative quietness, the sunshine, the view) than to their
commuting time, and even less importance to cultural factors (theatre, cinemas)
(op. cit., 2002, p. 24). These most important characteristics are always present in
upscale resorts in the mountains.

1. Primary home 2. Local 3. Not local

People looking for second home, either to keep
the property without renting it, or agreeing to
rent it for certain periods, depending on the
evaluation of their own equity value.
The property market
Looking to settle
where they have
permanently in the
their primary house
destination - because
is very different in
the resort is the town “Local” means that its
Characteristics terms of comparative
to which they are members operate in a
value of property.
attached or are moving similar economic
Also, they have a
there for professional environment to those
transport option that
reasons. actually living in the
is considered
resort.
acceptable from the
point of view of its
price, i.e. low-cost
airlines.
Degree of commitment Almost compelled Not compelled

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 Dynamics of price negotiation in real estate at upscale resorts in the Alps

1. Primary home 2. Local 3. Not local

From wealthy to
Socio- professional category Any kind Wealthy
very wealthy
Family living within a
An English family
radius of less than 200
A recently married living in London
km, or less than 2 hours
couple looking for an who is looking for a
by car, from the resort
apartment, or a property in which to
looking for a property in
growing family spend winter (and
Archetype order to spend
looking for a larger summer) holidays, as
holidays/weekends
house because they are well as other short
there. They might agree
short of space in their periods, like long
to let the property, for
present home. weekends, at the
rental, for short periods
resort.
of the year.
Underestimate of the costs to be faced (loans, Comparison with a
indirect costs owing to the transaction, operating similar object in the
expenses, possibly construction costs if building a town/country where
new property) they have their
Possible naïve evaluations
Comparison with a primary home, or
similar object in the with some other
town where they have resort in their own
their primary home. country of residence
Probably will not
accept another
Other properties property (owing to
“le coup de coeur”
Alternatives
i.e. impulse buying)
Renting a primary Use tourism accommodation (hotel, self-
home or buying in a catering unit) during long/short periods and
nearby town keeping the capital in the financial circuit.

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Miriam Scaglione

Awareness of conditions of
High High-to-medium Medium-to-low
the local market
Economic: the trade-off between the times
spent at the resort and the cost of traditional
Economic: reducing tourist accommodation.
the cost of travelling to Investment for
work every day. retirement: second home
Low cost of air fare
will become primary
Motivation one.
Hedonistic: the freedom of choosing any
Hedonistic: so as to
moment to come. The beauty of the landscape
be close to family and
and quality of services in the destination
relatives. Go on living
(skilifts, restaurants, etc.).The satisfaction of
in their present
owning a house in an upscale resort from the
location.
point of view of social standing.

Table 2: Characterization of the segments interested in the purchase of a property for personal use
in an upscale Alpine resort

Only 31% of Swiss people own the home where they live. Apart from the Baltic
countries, where the percentage of homeowners is even lower, Switzerland has the
lowest share in Europe. The canton of Valais is an exception, because the propor-
tion of those who own their own primary residence there is 61%.

As to the question of why they have given up the chance of owning their own
home, the two main reasons given are: not enough equity funds, and financial costs
which are too high to be affordable (op. cit., 2002, p. 47).

The second segment is local people looking for a second home. As Thalman &
Favarger (2002, pp. 228–229) observe “…the low proportion of households who
own their homes does not necessarily mean that so few renters of their main homes
own no property. We have seen how 10% of renting households own second homes
or other houses which are let to third parties”. They observe (p. 193) that the pro-
portion of tenants who own second homes in Switzerland is 7%. These tenants are
mostly wealthy retirees; two-thirds are Swiss owing second homes in Switzerland,
and one-third is foreign nationals whose secondary residence is abroad.

The Credit Suisse bank (2004) describes the life cycle of a secondary home as be-
ing in four phases. The first phase is the investment phase, which refers either to the
purchase of the property or to building a new house; this phase coincides more or
less with the life cycle of the owners themselves.

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 Dynamics of price negotiation in real estate at upscale resorts in the Alps

The second phase represents the moment where the property becomes a second
home, with intensive use as lodging or/and for renting it out to visitors. The third
phase marks reduced use by the owner, although it could also be put on the longer-
term rental market. The fourth and last phase could be either when the second home
become the main one or when the property is sold and becomes once again a sec-
ond home, which launches a new cycle.

Some empirical events support the hypothesis that the second home becomes the
main one when the owners reach retirement age, at least in the Valais, where there
are an increasing number of cohorts of those over the age of 45 in comparison with
Switzerland as a whole. The Bas-Valais seems very appealing for retirees, for vari-
ous reasons: exoneration of death tax and the tax on donations to descendents, the
spouse and parents, the lower cost of health insurance than in other cantons, etc
(Credit Suisse, 2004, pp. 18–19). Another reason is that the good air of the Alps is
beneficial for some retirees with chronic illnesses such as rheumatism, arthritis, etc
(Matos, 2005). Therefore, within the segment there are least two different modes of
economic evaluation, depending on the time-scale of the return on investment
(ROI): medium and long, if the second home should be considered as a serious al-
ternative for retirement.

The third segment that of not local people looking for a secondary home is – ac-
cording to this hypothesis – composed of people who do not live in Switzerland. In
almost all aspects, they are closer in terms of motivation to the second segment, as
shown in table 2. Nevertheless, the main difference is that their everyday economic
and financial circumstances are not the same as those of the former: firstly, owing
to their home currency, and therefore to the difference in their purchasing a prop-
erty of similar standard; secondly, owing to the difference in the culture and experi-
ence of the real estate market in their home countries; thirdly, their knowledge or
awareness of the property market in the resort might not be as accurate as in the
case of the local population. The premises in their case are also different from those
of the two other groups, as is the evaluation of alternatives. As a result, this seg-
ment is more willing to accept a higher price than the two other segments. Finally,
a most important factor is increasingly easy travel, thanks to low-cost flights, be-
tween their countries and Switzerland. Some authors, such as Vogel (2001, p. 51),
underline the importance of air fare pricing on tourism demand. This market seg-
ment is more likely than the two others to buy a property on impulse, and to per-
ceive it rather as a trophy. Bieger, Beritelli, Weinert & Wittmer (2005) propose a
scientific framework for ownership behaviour in secondary homes.

87
Miriam Scaglione

They support the idea that there are material goods which convey individual iden-
tity symbols inter (for others) and inner (for oneself). These authors underline the
symbolic nature of a secondary home for its owner. Nevertheless, whether a secon-
dary home could be considered as a trophy within the general Swiss outlook on life
remains an open question.

2.1 The role of segments in price determination

How do these three segments interact in a real estate negotiation? The trade-off hy-
pothesis outlined in box 1 is the key to answering the question. Only two out of the
six statements seem to hold good in this kind of market. These two statements are
the followings: the buyer is not compelled to buy a specific object, and there are
enough potential buyers for a property.

The fact that the actors are totally aware of the state and condition of the mar-
ket deserves deeper analysis. Rational expectations about the present and future re-
turn on investment in the market depend on the information available to the actors.

In table 2, all the segments do not have the same level and the same quality of in-
formation about the market; moreover, the two segments looking for a secondary
home could have either naïve expectations or different perspectives regarding their
respective rates of ROI, i.e. when buying a house for retirement. When actors over-
estimate such returns in a rational or irrational way, a gap is created between the
fair price and the price based on market fundamentals. At that moment, the market
could be either characterized by a bubble, or could simply be experiencing an ad-
justment (Nerlove, 1958) based on cycles typical of RE (i.e. Kuznet cycles).

The segment of potential buyers looking for a primary home has a threshold of ex-
pectations that is lowest, mostly based on the evolution of the price of renting. For
the other two segments, hedonistic motivations and naïve anticipations could place
the threshold higher than in the case of the first group, so they could accept a higher
price. Whether there is a bubble or not depends on each individual case, but the
conditions for the creation or the spread of a bubble are present in this kind of situa-
tion.

The fact that there is a reasonable timeframe for concluding the transaction,
usually of some months, deserves comment, especially regarding the Valais. In
Switzerland, the Lex Koller, which aims are to limit the access of foreigners to
property, is an important externality in the Swiss market for second homes. The
Federal Government assigns a quota of objects (properties) which can be sold to
foreign nationals, which is distributed by towns. In December 2006, the cantonal
government of the Valais decided to apply a moratorium and for 2007 banned sales
to foreigners in seven towns of the canton.

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 Dynamics of price negotiation in real estate at upscale resorts in the Alps

At that moments (Sept 2006), there were some 1,000 notarial sale deeds pending,
which represented a time-frame of 3-6 years to be consolidated (Fragnière, 2006).
The fact that the actors act prudently seems to be contradicted, at least, by no lo-
cal segment when one considers the long delay in consolidating the transaction.

Finally, the fact that the buyer has no particular interest in a particular object
could be violated, especially (but not exclusively) by the not-local segment of the
demand. Favarger & Thalmann (2006, p. 22) point out that this kind of buyer does
not a priori consider the property as an investment, but rather as one object in a
larger collection. A foreign buyer of this kind will not take travel costs and the pos-
sibilities of alternative accommodation into consideration, but instead will compare
the property with other objects which are not necessarily property at all. He will as-
sign it a collection value, without this necessarily having any close link with its ob-
jective market value.

In conclusion, in this market some elements of the trade-off hypothesis are contra-
dicted by the presence of these three different segments. As a result, the estimation
of real estate prices is affected upwards.

3 Analysis of property prices in Verbier

Verbier is a well-known resort in the Bas-Valais, in the Val de Bagnes, near the
Grand Saint Bernard pass on the route linking Switzerland and Italy. Within Swit-
zerland, a population pool of 2.5 million people can reach Verbier by car in 2
hours, and 6 million people within 3 hours (Credit Suisse, 2004, p. 14). From Ge-
neva International Airport the distance is 160 km by the A1 and A9 motorways,
which takes 1 hour 40 minutes.

Only 1.9% of the area of the Val de Bagnes (282.2 sqkm) is populated or used for
infrastructure (Office fédéral de la statistique, 2001, pp. data 1997-1998). The first
language spoken is French (87.2%), followed by Portuguese (3.76%) and English
(2.72%). The skiing area in Verbier is one of the most extensive in Europe, stretch-
ing over four valleys, between the Mont Fort, the highest point above the village,
and La Tzoumaz/Savoleyres, with a vertical spread of 1’500-3’330m above sea
level.

From the point of view of the hospitality sector, specifically for Verbier, the self-
catering sector accounts for some 90% of overnights. The capacity of all the hotels
in the resort is no more than 1’000 beds. Verbier was one of the first destinations to
offer chalet for rental combined with hotel services.

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Miriam Scaglione

3.1 Price bubble: to be or not to be?

There is general consensus in the literature about the definition of a price bubble.
This is present in the market when there is a gap, or difference, between the price of
an object and its fundamental value. Several authors have worked in developing
methods for detecting a market bubble in property, although less has been done
than in other kinds of markets, e.g. in stock options.

For Blanchard & Watson (1984), the presence of any gap does not, in itself, neces-
sarily mean that a price bubble exists; it could be merely what these authors call
“rational bubbles”. They claim (p. 84) that there is more than one perception of
such phenomena, as with any set of information. Therefore, perceptions of a bubble
can be different, as will the price the buyers are willing to pay.

In the same line of thinking, Didier Cornuel (1999, p. 9) observes that “The bubble
is rational insofar as the fundamental value is determined by a rational anticipa-
tion of future revenues”, but he denies that this is due to a different quality or a dif-
ferent amount of information. For Cornuel, a bubble is just an endogenous phe-
nomenon of the market, and is not only unpredictable but also inescapable. Also, he
considers that the fundamental value can be based either on rental income or on dif-
ferent macroeconomic variables, i.e. the labour market, the population, interest
rates, etc.

In the same perspective as Blanchard & Watson, Marc Nerlove (1958) had previ-
ously proposed - although not for the real estate market - that anticipatory market
adjustments are not necessarily a bubble, on the basis of the cobweb theory, which
represent the price/quantity dynamic (Ezekiel, 1938). A bubble could be merely the
movement necessary for a return to equilibrium or, in other words, just a natural
cycle.

In order to study the evidence for the existence of a price bubble, the present re-
search project used the cobweb method, namely the analysis of cycles based on the
price/quantity dynamic. The data derives from the Guinnard estate agency, which
until 2000 accounted for at least 80% of transactions, with a slight fall in its market
share after that date (Guinnard, 2007). Figure 2 shows the cobweb charts for hous-
ing and the price of the sqm, adjusted by the yearly Swiss Consumer Price Index
(SCIP), base 1982, for new and renovated properties.

In the case of new objects, there are three cycles. For new objects, the first cycle
begins in 1982 and runs until 1988. The price at the end of the cycle (1988) is
higher than at the beginning (1982), suggesting that the cycle does not return ex-
actly to the point of equilibrium.

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 Dynamics of price negotiation in real estate at upscale resorts in the Alps

In 1988, Swiss property was affected by a federal law against speculation; it is dif-
ficult to evaluate the effect of such an externality. The second cycle runs from 1988
to 1995, and the level of prices in 1988 (4’404 CHF) is the same as in 1995
(4’581 CHF). The market seems to find its natural state of equilibrium. During the
two first cycles, the number of objects for sale is always greater than 100. The next
cycle, 1995-2007, shows a different pattern: after a steady price level from 1996 to
2000, during which the increase was only of 5%, there is both an increase in price
(with the exception of the period 2002-2003, probably owing to the 9/11 effect) and
a fall in the number of objects placed on the market. The question is whether this
could be considered as a price bubble.

(a)

(b)

Figure 2: Cobweb charts. Numbers of properties offered vs price of sqm, adjusted by the Swiss
Consumer Price Index (SCIP) (base=1982) (Office fédéral de la statistique, 2007). Panel (a) new
properties, panel (b) renovated properties. The different lines linking the chronology of the obser-
vation show 3 different cycles.

91
Miriam Scaglione

Panel (b) of figure 2 shows a decline in the price of renovated properties in 2007;
whether this is a consequence of the sub prime crisis is an open question.

The main hypothesis about the 2000–2007 cycle is the existence of exogenous in-
fluences, such as the increasing interest of the UK market in Verbier as a resort.
The role of a foreign demand segment has at least been acknowledged as a factor in
the speculative bubbles affecting commercial real estate. The deregulation of the
commercial real estate market and globalization of financial markets contributed to
the international bubble in the second half of the 1980s in the UK and France, es-
pecially owing to Japanese investments (cf. Nappi-Choulet, 1999, p. 327). This re-
search supports the idea that a similar situation could have affected prices in Ver-
bier but rather than being due to speculative investors, the main reason could be the
hedonistic motivation underlying wealthy foreign demand. A number of facts sup-
port this hypothesis.

Firstly, the share of UK inhabitants on the demand side has increased during these
periods. Buyers from the UK are the first in terms of market share, and from 2003
to 2006 always accounted for over 40%, followed by Swiss buyers, whose lowest
level was 19% in 2005 and whose highest was 32.2% in 2003. In any case, the
Swiss share is always lower than that of UK clients (Guinnard Real Estate &
Tourism, 2007).

Secondly, the increasing number of low-cost flights, especially by Easyjet, is an

important fact for this segment, as has already been seen in the description of seg-
ments. An analysis of the evolution of UK passengers in commercial flights to Ge-
neva (Aéroport International de Genève, 2007); not only shows that the number of
passengers increases but also their winter seasonality becomes increasingly marked
(from 150,000 in 1999 to 350,000 in the highest month of the winter season 2007).

Finally, to test whether the increasing wealth in the UK is linked to the evolution of
property prices in Verbier, a causal time series model was built having as endoge-
nous variable the price of new objects in Verbier per sqm adjusted SCIP in log, and
as explanatory variables the supply (the number of objects available for sale) in ac-
tual value, and the equity market capitalisation of UK companies on the London
stock exchange market in log (London Stock Exchange, 2007). The model shows
that there is not only a link between the evolution of property prices in Verbier and
the capitalisation of UK companies on the London stock exchange, but, in addition,
the influence of the latter on the former variable increases after 2000. (The details
of that model and also the details about the evolution of UK passengers in AIG are
available in a longer version of this research on request to the author).

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 Dynamics of price negotiation in real estate at upscale resorts in the Alps

The quality of the objects on the market has also changed since 2000, at least in
terms of the surface area of the units being offered for sale. Even if it cannot be di-
rectly linked with the UK customer, this shift shows, besides the increasing price of
the sqm, an increase in the purchasing power of the demand. From 1982 to 2000
the average surface area was always below 100 sqm, with an increase over that pe-
riod of only 14%, but during the last 6 years the increase has been 87%.

In conclusion, there is indeed some evidence to link the increase in prices and a
shift in the quality of the properties to the “not-local customer” segment, specifi-
cally owing to persons coming from the UK who are not so much speculative in-
vestors as wealthy foreign nationals looking to enjoy the tourism attractions of this
upscale resort with their families.

4 Conclusion
The increasing presence of foreign customers in the real estate market in Verbier
and the increase in prices do seem to be linked, without it being possible to claim
there is a causal relationship, but at least through their taking place in parallel. The
“not-local customer” segment has always been traditional in the clientele of Ver-
bier. Better connections by air, both in frequency and (especially) at lower cost, to
Geneva encourage them to become owners in a destination which they have always
found popular.

The research shows some evidence that their presence in that market has driven real
estate prices up, so creating a bubble (whether rationally or not). On one hand, local
people wishing to purchase a primary home find it more and more difficult to find
one in the resort, given not only that prices are rising but also that the quality of the
accommodation on the market is increasing, which further restricts the alternatives
available.

Another important factor is the high differential level in parity purchasing power at
the regional and the international levels for this segment, in comparison with the
two others. Moreover, the local people segment is obliged to move assets in order
to find a primary house (table 2) and is the one with the narrower margin for nego-
tiation (fig. 1). In contrast, wealthier customers, buying a property that will have a
symbolic value, have motivations which are different from those of local people,
and are willing not only to pay higher prices but also to accept unusual situations,
such as waiting for years in order to have definitive ownership. Since the fair value
of a property is very much based on the comparison with similar objects already
sold in the market, prices in the resort are being pulled upwards.

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Miriam Scaglione

Also, some elements of the trade-off hypothesis (box 1) are not always respected,
and a market in this upscale resort could turn out to be not so much a normal real
estate market as a luxury one, where hedonistic values become more important than
other, objective values. At that precise moment, a price bubble could be created.
Nevertheless, given the high rates for renting apartments in Verbier, the author does
not think that this bubble is irrational, although this deserves further, careful analy-
sis, which is beyond the scope of this research. The author acknowledges that this
is one of the limitations of the study, together with the fact that no empirical re-
search has been carried out and the theoretical framework leaves out the segment of
professional investors.

Acknowledgements
The author would like to express her sincere thanks to the following persons:
Dr. Philippe Favarger, Deputy Director of Housing in the government of the Can-
ton of Geneva, for his precious support and advice; Professor Philippe Thalmann
from EPFL, for his useful review of the first draft, Professor Andrew Harvey of
Cambridge University, for the check of time series models, M. Daniel Guinnard, of
Guinnard Real Estate & Tourism for the data and all the field information neces-
sary for this research, and Céline Fellay of the same company; M. Stéphane Goeke,
Head of Marketing at the Aéroport International de Genève, who provided the data
series of passengers by destination and regarding the skiing market at the airport;
Mr. Pierre-Yves Délèze, Director of the Tourist Office of Verbier; and Mr. Merrick
Fall for editorial assistance in English. Nevertheless, any possible inaccuracy which
the text may contain is the sole responsibility of the author.

94
 Dynamics of price negotiation in real estate at upscale resorts in the Alps

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95
 A perspective on beauty – Reading urban
attractiveness via content analysis of photographs

Rico Maggi & Claudia Scholz

Abstract
Tourists like beautiful places. This should influence willingness to pay, demand for
destinations and the development of places with its repercussions on real estate. But
if the intention is to analyze these interactions empirically, a necessary first step is
to measure the beauty of a place. This is what this paper tries to achieve. While the
traditional focus in this context is on landscape and the (negative) impacts of real
estate development on it, we concentrate on cityscape and city tourism looking for
the positive – beautiful – aspects of the built environment as perceived by visitors.
The underlying idea is that tourists take pictures and bring home souvenirs of what
they like. Existing destination rankings fail by definition to account for un-
measurable dimensions of urban reality such as culture, atmosphere and aesthetics.
But urban development driven by measurable dimensions only, might not be a good
guide towards an attractive city and a competitive destination The ambition of this
work is, therefore, to measure the un-measurable, the attractiveness of the city-
scape, in the eyes of the beholder – the visitor, the commercial photographer and
the artistic photographer. We have performed a content analysis of 225 photo-
graphs and using a set of 42 variables grouped in three modalities reflecting the
content, the way of picturing and the spatial organization. The results have been
used to identify underlying dimensions and clusters of images. The main result is a
dominating dimension, namely a view on ’heterogeneous’, ’general built’ environ-
ment of ’contemporary’ architecture. The famous landmarks and icons of Dubai
appear only in third dimensions in order of importance, while art and culture and
entertainment are not a specific feature of the photographs. Regarding the ambition
to compare urban beauty among cities, two aesthetic values were calculated for
Dubai and five other cities. Dubai ranks low according to both measures and across
all groups of observers.

Keywords: Content analysis, photography, urban beauty

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Rico Maggi, Claudia Scholz

1 Introduction
This paper is about the perception of beauty of a cityscape as perceived by tourists
in comparison to professional photographers. In city tourism the urban reality can
be considered as a location of production of the tourism experience (Croce &
Maggi 2007). Accordingly, the possible motives for city tourists are manifold,
reaching from shopping to heritage and architecture, and from cultural to educa-
tional and sports events, but can reasonably be encompassed in a broad definition
of cultural tourism as given by the Association for Leisure and Tourism Education
(ATLAS). There, the conceptual definition is: “The movement of persons to cul-
tural attractions in cities in countries other than their normal place of residence,
with the intention to gather new information and experiences to satisfy their cul-
tural needs ... ” (WTO 2005, VI).

What is of interest here is that independently from the final scope of a visit, city
tourism is happening in the built environment of the place – the cityscape as op-
posed to the landscape. And like in e.g. beach or mountain destinations, where the
landscape can be the main driver, but mostly is just enhancing the tourism experi-
ence, the cityscape will normally set the scene for the tourism experience rather
than representing its final aim (with the exception probably of architectural tour-
ism). But as evidenced by Bilbao and the ensuing trend of architectural icons as an
attractor, setting the scene can become a relevant strategic element of city market-
ing and hence tourism performance.

Tourists prefer to go to beautiful, or better, attractive places. But does beauty refer
to single architectural icons, to buildings in general, to skyscrapers or rather to open
spaces? Moreover, would tourists refer those fast built skyscrapers as ’beautiful’?
When people go to New York or Hong Kong they go for events, shopping and cul-
ture but also they go for the built environment. But, in contrast to many of Dubai’s
buildings, neither Manhattan’s nor Hong Kong’s skyscrapers have been built for
tourists.
Tourists return home with ’beautiful’ memories which are captured in photographs
as souvenirs. They pictured what they liked and do not repeat exactly the stereo-
types of travel agent’s catalogues, inherently limited by their marketing purpose
and probably their technical and professional knowledge.

Consequently our question is: what do people take home from Dubai? Is there an
’urban attractiveness’, and can it be traced in the pictures of tourists? We expect
Dubai to have a very specific beauty – driven more by an economic rationale than
by aesthetic urban paradigms as it has excellent scores with respect to tourism as
well as to real estate. It ranks on 1st position for the best beach holiday in 2008 re-
garding the website Trip advisor the content of which is user-created, so to speak
tourist-created.

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 A perspective on beauty – Reading urban attractiveness via content analysis of photographs

But what about the cityscape of Dubai? The oft criticized applied building scheme
of skyscrapers along the Dubai’s beach follows the pure market logic. What is
scarce is the sea view and therefore the optimization lies in building up to permit as
much people as possible this feature, but do the fast track constructions of sky-
scrapers attract tourists?

We propose to measure and explain this perceived urban beauty in quantitative

terms, based on revealed preferences of three groups of observers by performing a
content analysis of photographs. Use of visual images as data material can tell us
more about the multiplicity of meanings and messages as opposed to more tradi-
tional, normative data collection methods which seldom allow one to go further
than frequency analysis. The application of the method ’content analysis’ on pho-
tographs for answering our question on the un-measurable qualities of urban situa-
tions is as any other theoretical method challenged through the way questions are
asked. But taking photographs is a very clear activity. When someone takes a pho-
tograph they are implicitly assigning value to a certain scene, at that specific mo-
ment in time. Any kind of notion inside a picture is accredited a special value
through being fixed and framed on paper or in some 2D region.

While we do not impose a specific norm, through the selection of variables, our
search for the attractiveness of a city is formed through our Western world view.
The selected codes for the data structure were based on our ongoing research on the
image of European cities, where categories were drawn from those identified by
Kevin Lynch (1960) – landmark, path, districts, edges, and nodes. “Many studies
confirm the stability of these five elements across a variety of populations and cit-
ies ... Controlled experiments using a statistical technique called cluster analysis
also confirm the validity of the five elements …” (Nasar 1998, p. 7). Inhabitants
share the same meaning about defined features. For example people like places of
open space and scenery (’openness’) and dislike places for their restriction, crowd-
ing, congestion and narrow roads.

As our objective is focused on urban situation seen by a wider range of people

rather than on the ’image’ of the place, we use three perspectives: amateur photo-
graphers (our tourists), commercial photographers, and artistic photographers.
Among these three, only the commercial photographers will necessarily choose a
perspective that “sells” Dubai. Artists will have a more critical, analytical eye,
while amateurs simply represent the tourists as residents rarely take pictures of their
own city.

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Rico Maggi, Claudia Scholz

In a previous research Govers & Go (2005) have analysed photographs from “offi-
cial” websites like Dubai Tourism, Dubai E-Government, UAE Ministry of Infor-
mation and Culture, Abu Dhabi Chamber of Commerce etc. which are clearly mo-
tivated through the destination marketing for the tourist market. Their results differ
significantly from ours due to the different sample and the restriction of the content
analysis to the motives found in the pictures. We analyze correlations among pic-
ture attributes using cluster analysis to measure urban beauty and to discover simi-
larities and differences among different observer groups. Furthermore, our coding
scheme permits us to calculate an aesthetic measure for Dubai and five other cities,
and compare it across the groups of observers. This is the first time to our knowl-
edge that these measures have been calculated in this context.

In what follows we will introduce Dubai as an example for an instant city, and pre-
sent the way in which we measured attractiveness. We then discuss the results of
the statistical analysis, including the measures for 6 cities followed by some con-
clusions.

2 Background: Profile of Dubai

This is the new world, young and unique in its Western derivative expression.
Without any remarkable historical, natural or religious sites, Dubai reinvented itself
with artificial islands, faked souks, indoor ski slopes as an international destination
for shopping, tourism and business initiatives in the Middle East. But the descrip-
tions of Dubai are contradictory. Some speak of the city of superlatives – every-
thing is the highest, the biggest, the largest; others from the city of ’gatedness’,
’sameness’, ’fadeness’ and ’maleness’. In its run for exceptionalism all has become
the same.

Dubai, as every city, has thus its historical, sociological, economic and political
specificities which are important to understand its form. The most interesting his-
torical feature in our context seems to be the fact that this city has been built not in
response to the people inhabiting it but as part of a global strategy. Dubai’s diver-
sity of people and cultures attracts especially ambitious young professionals from
all over the world who stay an average of 2 or 3 years. Most liked is the buzz of
working in a multicultural environment, followed by the ability to have unparal-
leled leisure facilities, a vast ocean and desert escapes where they can recharge
their batteries. If according to Glaeser (2001) urban success comes from being an
attractive ’consumer city’ for high skilled people, then Dubai might be an extreme
sample – a city almost exclusively built for expatriates and (foreign) investors. This
relates to the second specificity: the sociological mix is characterized by small local
elite, a small group of Western and Asian expatriates, and a majority of immigrant
workers.

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 A perspective on beauty – Reading urban attractiveness via content analysis of photographs

Foreigners make up 85% of the population – none of the diverse groups is able to
form a relevant mass of active citizens. Immigrant workers do not have the money
neither the rights to express a demand regarding their environment. Wealthier expa-
triates often do not have the time or interest for interaction with the city develop-
ment as they stay only for short periods. Therefore, the economic logic is driven by
partly speculative real estate investments in view of the transformation of the city
in a financial centre and a tourist magnet.

The planning seems to promote this development by encouraging huge and prestig-
ious development projects without a view for the conventional public urban space.
Market logic is dominating, resulting in investments in high end apartment build-
ings targeting vacationers, featuring specific services and incentives. Developers
built hundreds of miles more in shape of Palm Jumeirah and The World – Islands to
give maximum beachfront area. Most of the 500 skyscrapers under construction are
built on generous spots, which is paradox as skyscrapers are usually a sign of land
scarcity. However, beneath the city’s glitter serious problems are arising. The infra-
structure is overtaxed, inflation is climbing, and crime and prostitution are on the
rise. Dubai isn’t subtle; it is crowded and has a smoggy skyline though all is new.
There is scarcely open space or an uncongested highway.

Given this very special background we expect our analysis to produce results that
define an aesthetics that differs from what we know either from tourist catalogues,
or from comparing oriental as well as Western cities – a beauty based on a recently
constructed built environment.

3 Coding scheme ’attractiveness’

Our measurement is based on Kant who defined the principles of beauty and aes-
thetic value in the perceiver, and we therefore consider as important the participa-
tion of the individual in the process of evaluation. However, we will confront our
results with normative measures of beauty derived from the writings by Plato, who
believed that beauty exists for its own, independently from subjects. These meas-
ures capture beauty in terms of aesthetic attractiveness with complexity and order
as components and have been defined by Birkhoff (1933) and Eysenck (1970).
Complexity is seen as positive, as it activates the brain activity. The more energy I
put into understanding something visual, the more beautiful it becomes up to a spe-
cific point, where complexity capsizes in chaos. We analyze complexity through
diversity of buildings (building epoch, building types) and their formations.

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Rico Maggi, Claudia Scholz

The use of visual material employing the research technique of content analysis has
been used in many studies. Beside the general criticism of pure ’quantification’ this
method has proved to be reliable for a qualitative interpretation, too (Lutz &
Collins, 1993). Our analysis goes beyond the commonly applied method of content
analysis (Sternberg, 1997) as it focuses on the content shown in the photographs
and their derivative meanings, too. The interplay of elements and not the analogy of
a form were what interested us. Typically the interpretation of visual images occurs
on three modalities at which the meanings of the picture are made: the site of pro-
duction, the site of the image itself, and the site where it is seen by various audi-
ences.

In the current research we look only at the second, the image, and its compositional
qualities, distinguishing three groups of criteria, namely those of content, spatial
organization, and way of picturing. The way the space is organized refers to two
aspects: the organization of the space ’within’ a picture, and the way the spatial or-
ganization of a picture offers a particular viewing position to its onlooker (Rose,
2006). The subdivision is important for several reasons. First, concentration purely
on the content of photographs holds the risk to neglect the specific perspective of
the observer which is relevant and tells its own story as will become clear from the
results. Second, applying traditional content analysis, the focus is mostly on ob-
jects, i.e. explicit content, and not on things left out – space.

To sample the data, an online search was conducted to find representative websites.
Twenty websites were selected and searched for photographs of Dubai taken in the
last 4 years, and grouped depending on that made the photograph:
1. professional: professional photographers working for photographic
co-operatives like the agency Magnum (owned by photographer members) and
not aiming to sell the location
2. amateur (tourists): amateur photographers where we gathered the photographs
from websites like flickr, google, smug;
3. projected (commercial orientated): professional photographers working for
photographic agency which the principle aim to sell for marketing proposes, for
example corbis or getty. This group aims to project a destination identity.

The partition was not only necessary because reasons why the image is taken differ
extremely but was also driven by our interest in the specific tourist view. There is a
strong dependence between groups 2. ’amateur’ photographs and group 3. ’pro-
jected’ photographs as amateurs tend to photograph what they already know from
advertisement and marketing.

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 A perspective on beauty – Reading urban attractiveness via content analysis of photographs

From each website up to 150 images (depending on disposal) were downloaded. To

the circa 2000 collected images we applied a statistical random sampling method
which selected 15 images/source. The data quantity resulted in 75 images/ perspec-
tive (amateur, professional, projected) and 225 images in total. Having selected the
samples of the photographs to work with, we mapped a set of categories for coding
the images, which were developed in a previous research concerned with the
evaluation of ’attractiveness’ in European cities. Afterwards all photographs were
coded by one coder in a short time span, diminishing thus the risk of an altering
mindset.

Coding categories (for detailed description see appendix table 6):

1 History of place (historical significance)
2 Elements
3 Main motive
4 Content
5 Uniqueness
6 Crowdedness by people
7 Amenities & Elements for pedestrian
8 Public Art
9 Naturalness (presence of nature)
10 Light/light effects
11 Surprise
12 Spaciousness
13 Uniformity
14 Visual complexity
15 Level
16 Motive in foreground or background
17 Brightness
18 When taken
19 Vantage point

Not all categories would be considered ’enlightening’ for the evaluation of an Ara-
bic city, where the climatic situation naturally excludes some Western world urban
features such as pedestrian amenities. We kept them in order to see how big might
be the existing influence of global design rules. As tourists tend to take photo-
graphs during the day the differences of night and day were not highly valued.

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Rico Maggi, Claudia Scholz

Every object offers different meaning at different levels. In picture on a Macro

Level (XL) they are associated with the key attributes of the natural setting of the
city and have more symbolic meanings. At an intermediate Level (M) objects re-
flect the building and street patterns and their formal aesthetics; and on the Micro
Level (S) they make the sensory aesthetics of the environment recognizable by fo-
cusing on materials, textures etc.

4 Data analysis
The results of the frequency analysis of the 225 photographs analyzed confirm that
there is a discrepancy between the publicity image and the way different groups of
observers see Dubai identity. In our analysis focussing on cityscape, tourists like
professional photographers see a Dubai that is different from the one in the pro-
spectus, and from that found by Govers & Go (2005).

Overall, we observe as the top classified attributes the following: contemporary ar-
chitecture, brightness (or daylight), general built environment and individual con-
trasting elements, and an intermediate view level. Most pictures share a view on the
central object with no space captured and tend to have the motive in the back-
ground (with the exception of tourists). While ’projected’ often catch complexity in
their images distinguished by the presence of few people, photographs by tourists
and professionals tend towards simplicity and contain views on streetscape (dis-
tricts). Finally projected and professional differ with respect to the perspective, the
first ones preferring above eye level view, the second eye level.

main attributes

contemporaneous
bright
general built
individual
source : unknown amateur picture

day
intermediate level
central object
simplicity
district
background
eye level

Table 1: The picture illustrates the dominant view (across all groups) of Dubai.

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 A perspective on beauty – Reading urban attractiveness via content analysis of photographs

Altogether this first analysis verifies that 96% of Dubai has been built recently (see
for this and the following figures table 7 in the Appendix). A vast majority of the
photographs (83%) have the attribute ’built space’, but miss the attributes of public
space which describe urban life in Western cities. Public art (0%), amenities (1%),
street events (1%) and lampposts (2%) are practically absent in the photographs.
Regarding the way of picturing most of these photographs are taken at daylight,
having the vantage point at eye level. For a place being built in the desert we found
surprisingly often (36%) nature attributes like ’trees’ and flowers and ’overall vege-
tation’ (parks). Items characterizing the quality of space yield a further inter-esting
result. Given that judgements on the quality of space are subjective, we have de-
fined an easy common denominator, distinguishing between a ’uniform building
scheme’ (repetition of the same building units or buildings with strong design
guidelines) and ’individual’ building schemes (reflecting the free market situation).
76% of all photographs are coded with individual building styles. It is no surprise,
therefore, that 58% of the photographs represent space focussing on a ’central ob-
ject’ while ’open views’ characterize 29% and ’defined spaces’ only (13%). We
conclude that, at least in the perception of our three categories of observers, there is
little concern for space in Dubai.

While the dimensions of photographs taken by tourists, professional and commer-

cial (’projected’) photographers are remarkably similar as far as the dominating
items are concerned, some interesting differences emerge. These regard the pres-
ence of trees, perspectives at or above eye-level, crowdedness, complexity, micro-
level and photographs taken at sunset/sunrise as illustrated in table 2.

Commercial commissioned photographers (projected images) take 25% more pho-

tographs of complex situations than tourists do. The images are captured more dur-
ing sunset and sunrise with the vantage points above the eye level. Their profes-
sional assignment forces them to look for more dramatic situations and the most
embellishing lights, which is the one of the sunset or sunrise. Professional photog-
rapher, in contrast to projected, tend to take photographs at eye level of crowded
places, and they see less trees than the other two groups – a result of their quest for
picturing real life in the city? As compared to professionals, tourists are more likely
to perceive Dubai as a city with trees and tend to take photographs of peaceful at-
mospheres with the vantage point above eye-level and few people (their travel
mates?).

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Rico Maggi, Claudia Scholz

Table 2: Different perspectives of amateurs, professionals and projected

In order to get a more comprehensive impression of dominating dimensions in the

photographs correlations among variables have been used to form clusters identify-
ing hidden common dimensions. Given that all our variables are dichotomic (ab-
sence or presence of an item) we have chosen clustering variables rather than ap-
plying a principal component analysis1. We find four distinct dimensions the first
three of which are described in table 3. The results show the similarity among the
three groups of observers as far as the relevance of dimensions is concerned, but we
also can gain some additional insight. We call the dimension identified by the first
cluster “Cityscape”. This dimension aggregates some of the most frequently pre-
sent attributes on photographs and identifies therefore the dominant underlying di-
mension of photographs of Dubai. We describe it as a view on ’heterogeneous’,
’general built’ environment of ’contemporary’ architecture.

___________________
1
The algorithm “size difference” of the SPSS package was used for this purpose. The detailed
results of the analysis are available from the authors upon request.

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 A perspective on beauty – Reading urban attractiveness via content analysis of photographs

Dimension 1 Dimension 2 Dimension 3

CITYSCAPE PEOPLE LANDMARKS

All Complex visual scene of Open views including

peaceful districts at eye- icons, landmarks and trees
level with the main motive above eye-level
in the foreground

View on heterogeneous
Amateurs general built environment Peaceful districts at eye- visual scenes including
of contemporary architec- level with the main motive landmarks and trees are
(tourists) ture in the foreground viewed above eye-level

Projected Complex visual scenes Open views including

above eye-level with few landmarks, trees, an over-
(commercial people and the main motive all landscape and districts
orientated) in the foreground at eye-level

Professionals View on general built envi- Complex visual scenes with Views on heterogeneous
ronment of contemporary few people and main motive districts at eye-level
architecture in the foreground

Table 3: The 3 main hidden dimensions

The second hidden dimension, “People” groups variables of intermediate weight

and characterizes a complex visual scene of peaceful districts at eye-level with the
main motive in the foreground. The third dimension, “Landmarks”, represents cor-
related variables of low to intermediate weight and offers open views within icons,
landmarks and trees pictured with a vantage point above eye-level. The famous
landmarks and icons of Dubai are thus present, from a visitor’s perspective2, as the
third most important dimension only. Overall, the typical Dubai picture therefore
represents contemporary buildings, then streetscapes with few people (sometimes
only the amateurs themselves), then landmarks and rarely art, culture, entertain-
ment and events.

___________________
2
Note that we consider all three categories as visitors, all be it in different ways and with
different purpose.

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Rico Maggi, Claudia Scholz

While the frequency counts and the clustering of variables can thus give a clear
idea of the communalities among the photographs in terms of dominating items,
they do not tell us much about significant differences among groups of photo-
graphs. E.g. the first above dimension contains items that are practically present on
every photograph and hence do not make a difference. With a TwoStep Cluster
analysis we have therefore clustered the photographs (cases) instead of the items
(variables). Individual cases are combined to form clusters based on a nearness cri-
terion. Variables that are not dominating the image of Dubai will discriminate
more. We report in table 4 the three most important variables characterizing each
cluster, where importance is a combination of the weight of the variable in the clus-
ter according to the statistical procedure, and the weight of the variable across all
photographs. The names of the clusters represent labels that have been chosen in-
terpreting these three most important variables and indicate thus three distinct char-
acters of views on Dubai that are otherwise rather uniform.

Cluster 1 Cluster 2 Cluster 3

Name Panorama Landmark Ambience

% of photographs 41 33 26

Variable 1 Open view Above eye level Defined space

Variable 2 Macro view Landmark Crowded

Variable 3 Surprise Sunset / sunrise Art / Culture

Table 4: Clustering Dubai photographs (all observers)

Looking at these clusters one has to remember, that independently from the mem-
bership of a picture to one or the other cluster, they will almost always contain con-
temporary architecture (the above hidden dimensions). The first and largest group
of photographs distinguishes itself from the others by an open bird’s eye view with
sometimes surprising contents – we call it “panorama”. The second cluster, con-
taining a third of the photographs is characterized by above eye level views on
landmarks, often at sunset or sunrise – we call it “landmark”. Both clusters have in
common that the most discriminating variable is the way of viewing rather than the
(mostly identical) content. The third and smallest cluster contains photographs
which are distinct with respect to the representation of space, sometimes but not
always representing crowded streetscapes and art and culture – we call this cluster
“ambience”.

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 A perspective on beauty – Reading urban attractiveness via content analysis of photographs

So far we have been analyzing the beauty of Dubai as contained in the eyes of the
beholder. We now want to confront this with a normative view. Attaching a value
to the pictures implies imposing a norm which permits – like in other rankings – for
comparisons across cities. We apply two measures that can be found in the litera-
ture. The first one, developed by Birkhoff (1933) assumes that the aesthetic value
increases with the order in the picture and with its simplicity. Birkhoff therefore
proposes to calculate the measure M for the aesthetic value as the quotient of order
(O) and complexity (C). A second measure, developed by Eysenck & Castle (1970)
proposes in contradiction to Birkhoff to measure M as the product of O and C. Ap-
plying these measurements to data from picture content analysis and selecting as
the indicator for order our variable ’collective scheme’ and for complexity our syn-
onymous variable, we presented the values for the two measures (ordered by
Eysenck ’s measure) in table 5.

Total O C
number of (collective (visual
City analysed scheme) complexity) MBirkhoff = O / C MEysenck = O * C
tourist
pictures

Amsterdam 47 43* 53* 0.81 2279

Zürich 75 34 52 0.65 1768

Krakau 88 27* 53* 0.50 1431

Stockholm 75 26 35 0.74 910

Barcelona 40 13* 43* 0.30 559

Dubai 75 16 27 0.59 432

Table 5: Aesthetic measure calculated on tourist pictures

* as the available data is not equivalent to all cities, the numbers were calculated in relation to a
total number of 75. This is used for the calculation of the aesthetic measure.

Comparing the two rankings we find as a first thing a surprising consistency among
the two measures indicating that “order” seems to dominate, i.e. to be more dis-
criminating than “complexity”. This order is more present in the pictures taken by
tourists to European cities – with the exception of Barcelona and Krakau. Secondly,
Dubai ranks higher (4th instead of last) when complexity reduces beauty rather than
when it enhances it.

109
Rico Maggi, Claudia Scholz

Finally, Barcelona as a top destination ranks lowest among the European cities.
Comparing now the two financial centres we note that Zurich ranks clearly higher
than Dubai according to both measures (note that we analyzed the same number of
photographs in each category for both cities). More significantly, the advantage of
Zurich over Dubai is much more obvious for the measure which gives weight to
complexity3. However diversity is an attribute which is also created in the course of
time and therefore instant cities like Dubai have not reached their full potential in
this field.

Though the application of these measures serves mainly for illustration they are
thought provoking. In a Birkhoff worldview beauty comes from order and simplic-
ity, and cities ranking high should attract tourists with respective taste. Alterna-
tively, a top rank in the Eysenck ranking indicates attractiveness for visitor seg-
ments with a preference for diversity.

5 Conclusions
The ambition in this paper was to measure the hidden dimensions of the urban
beauty of Dubai in the eyes of the observers. Our analysis is not based on how we
see Dubai but how a broader range of persons see it. We have performed a content
analysis of 225 photographs using a set of 42 variables grouped in three modalities
reflecting the content, the way of picturing and the spatial organization. The results
of these measurements have been used to identify three hidden dimensions and
three clusters of images, and calculate measures of the aesthetic value of Dubai.

A first important result concerns the presence of a dominating dimension in the

large majority of photographs, namely a view on heterogeneous general built envi-
ronment of contemporary architecture. The famous landmarks and icons of Dubai
appear only in third dimensions in order of importance, while art and culture and
entertainment are not a specific feature of the photographs. The most discriminat-
ing variables are those measuring the way of viewing rather than the content. The
largest cluster of photographs distinguishes itself by its panoramic view with some
surprises. Observers do not seem to perceive the missing urban space as discrimi-
nating. Regarding the aesthetic value we find that professionals observe the highest
degree of beauty, while amateur photographs of Dubai results in the lowest aes-
thetic value according to Eysenck i.e. if complexity is enhancing beauty, and Dubai
ranks relatively low in the pictures of tourists according to both measures.

___________________
3
Comparing across groups of observers (not presented here) we note that agencies catering for
tourists take the relatively most complex photographs and thus rank low according to Birk-
hoff and high with respect to Eysenck. Professional artistic photographers satisfy both aes-
thetic criteria while tourists tend to see beauty in simplicity.

110
 A perspective on beauty – Reading urban attractiveness via content analysis of photographs

Without taking a definite position which calculated aesthetic value might be the
better one, we find ourselves closer to the one proposed by Eysenck, which is more
consistent with measuring attractiveness as defined by recent economic research on
consumer cities by Glaeser (2001). Glaeser’s idea is that a beautiful or attractive
city is reflecting the diversity of its inhabitants as well as activities in a complex
image. These results give indications for Dubai on the critical aspects for increasing
attractiveness of the city via its quality of life. On a more general level our findings,
based on the revealed view of a large group of observers with different perspec-
tives, should help to orientate the urban development strategy in general and not
only from an economic perspective.

We thus believe that our research based on a quantitative analysis of beauty can
make a relevant contribution. Before proposing to apply these measures for man-
agement and marketing purposes, more research is needed. Future efforts should in-
troduce another meta-level in the coding process, one that considers different per-
spectives in the judgmental process. As different coders interpret what seems to be
the same code in different ways a sub-sampling of different coders seems appropri-
ate. Also, rather than applying beauty norms from art history, it would be fruitful to
have the pictures evaluated (in forms of rankings, willingness to visit/pay etc.) by
control group so that the dimensions identified by our content analysis would be-
come determinants of different kinds of beauty.

Nevertheless, we are confident that our analysis helps to empathise and visualize
feelings different people have in Dubai, and give impulses for guiding development
to invest in aesthetics. It should include ethnical, functional and physical (environ-
ment) diversity.

111
Rico Maggi, Claudia Scholz

Bibliography
ATLAS (2005): Cultural Tourism in Europe (Greg Richards, ed.)
http://www.tram-research.com/cultural_tourism_in_europe.PDF
Birkhoff, G. (1933). Aesthetic Measure. Cambridge : Harvard University Press.
Croce, V. & Maggi, R. (2007). International tourism demand in multioption destinations: a
characteristics approach. Paper presented at the 1st IATE Conference Palma de Mallorca
Chalfen, R. M. (1979). Photography’s role in tourism: some unexplored relationships.
Eysenck, H. & Castle, M. (1970). Training in Art as a Factor in the Determination of Preference
Judgments for Polygons. British Journal of Psychology 61, 65–81.
Glaeser, E. L., & Kolko, J., & Saiz, A. (2001) Consumer city. Journal of Economic Geography, 1,
27–50.
Govers, R. & Go, F. M. (2005). Projected Destination Image Online: Website Content Analysis of
Photographs and Text. Information Technology & Tourism, Vol. 7, 73–89.
Lynch, K. (1960). The image of the city. Cambridge: MIT Press.
Nasar, Jack L. (1998). The evaluative image of the city. Thousand Oaks: SAGE Publication, Inc.
Rose, G. (2006). Visual Methodologies. London: SAGE Publications Ltd.
Wileman, R. E. (1983). Visual Communicating. Educational Technology Publications.
New Jersey: Englewood Cliffs.
Zeki, S. & Kawabata, H. (2003). Neural Correlates of Beauty. The American Physiological
Society 91, 1699 – 1705, 2004.
World Tourism Organization and European Travel Commission (2005). City Tourism & Culture –
The European Experience. ETC Research Report N° 2005/1, Brussels

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 A perspective on beauty – Reading urban attractiveness via content analysis of photographs

Appendix

Nr. Category Symbol Description Definition

th th
01 History of (A) • 18 / 19 century The definition of the histori-
CONTENT

place (C) • contemporaneous cal significance is based on

the principle element pic-
tured, not the most recent
one.
02 Elements (D) • districts – characteristic area In the case of 2 or more
(streetscape etc.) situations presented in the
(E) • edge – lakefronts, ocean- picture, the choice was made
front’s, riverfronts, Harbor regarding where the focal
fronts point is.

(L) • landmark
(N) • nodes - building plazas,
squares, urban parks
03 Main motive (C) • art/culture (historic site, art), “Historic site” might be
(R) single building or object viewed as opportunity to
• religious place increase knowledge,
whereby religious pilgrimage
or places have a unique
psychological attribute.
04 content (E) • environment ((physical set-
(G) tings : beach, geographical
(C) features, parks)
• general built form (general
building architecture, spe-
cific structure of interest)
• cultural & entertainment
(night club, sport, theme
parks, events, festival, spec-
tacle, Temporary Uses -
Programming – Events, food,
shopping area)
05 Uniqueness (UB) • unique icons built, such as
(UF) Sydney Harbour bridge
• special events, like festivals

113
Rico Maggi, Claudia Scholz

06 Crowdedness (R) • restful/relaxing (0-2 persons)

by people (C) • crowded
07 Amenities & (C) • cafes
Elements for • kiosks & carts
pedestrian • pedestrian amenities
• seating
08 Public Art (A) • public art
09 Naturalness (T) • single trees/flowers Value the presence of nature.
(O) • overall vegetation (park)
10 Light/light (I) • installations / building
effects (L) lightings
(S) • lamppost
• outdoor scones
11 When taken (D) • day
(S) • sunset/sunrise
(N) • night
12 Spaciousness (D) • deflected view / enclosed
SPATIAL ORGANIZATION

(types of limi- depth (narrowness) / closed

tation) (O) form - defined space (strong
physical form)
(C) • wideness and open view /
visual scope (panorama)-
scenery, more than one focus
• central object, no space
captured
13 Uniformity (I) • individual freedom Individual freedom is for the
(Contrasting elements) sake/benefit of a higher and
(C) • collective scheme (uniform), collective scheme, where the
part of a bigger whole : parts become something
situation greater by contributing to a
whole.

114
 A perspective on beauty – Reading urban attractiveness via content analysis of photographs

14 Visual com- (C) • complex Complexity relates to num-

plexity (S) • simplicity ber of different elements and
their distinctiveness in one
scene (one system). People
notice variation in
complexity – the interest,
excitement, viewing time
increase. Even if it is highly
subjective, the notion of
existence is possible. We
aim not to quantify it.
Level (XL) • macro level (bird view etc.) Big scale has the capacity to
WAY OF PICTURING

15
(M) • intermediate level (street dislocate the body in a
(S) ambience etc) physical or mental journey –
• micro level (one single it is seen as positive.
object)
16 Motive in (F) • foreground
foreground (B) • background
or back-
ground
17 Brightness (B) • bright Defined through atmosphere
(D) • dark in the space (narrow street,
bright buildings)
18 Surprise (SU) • surprise Surprise effect is very hard
• not surprising to define, but we consider it
as matter of content than
form.
19 Vantage (A) • above eye level All space is organized
point (B) • below level around an oriented
(E) • eye level standpoint of a human body

Table 6: Detailed description of coding scheme

115
Rico Maggi, Claudia Scholz

AMA- PROFES- ALL

PROJECTED ALL
TEUR SIONAL (%)
CONTENT contemporaneous 75 70 71 216 96
18th century 0 5 4 9 4
district 39 31 46 116 52
edge 14 16 13 43 19
landmark 21 25 14 60 27
parks/plaza 1 3 2 6 3
art/culture 0 4 4 8 4
religious 3 2 2 7 3
environment 3 4 5 12 5
general built 71 69 63 203 90
cult./entertainment 1 2 7 10 4
icon 15 25 22 62 28
events 0 0 3 3 1
relaxing 35 38 33 106 47
crowded 4 0 20 24 11
amemties 0 0 3 3 1
public art 0 1 0 1 0
trees 30 28 13 71 32
overall 1 6 2 9 4
lampost 1 2 2 5 2
installation 7 12 5 24 11
day 54 45 60 159 71
night 8 6 9 23 10
sunset/sunrise 13 24 6 43 19
SPATIAL defined space 9 8 13 30 13
ORGANIZA- open view 20 28 17 65 29
TION central object 46 39 45 130 58
individual 59 60 53 172 76
collective scheme 16 15 22 53 24
complex 27 46 32 105 47
simplicity 48 29 43 120 53
forground 40 37 33 110 49
background 35 38 42 115 51

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 A perspective on beauty – Reading urban attractiveness via content analysis of photographs

WAY OF micro level 8 10 18 36 16

PICTURING intermediate level 56 46 49 151 67
macro level 11 19 8 38 17
bright 71 71 71 213 95
dark 4 4 4 12 5
surprise 6 3 10 19 8
eye level 34 25 52 111 49
above eye level 28 42 12 82 36
below eye level 13 8 11 32 14

Table 7: Content analysis results (N=225)

117
 Section 3:
The Socio-Economic Impacts of
Real Estate on Destinations

119
 The economic impact of tourism in private homes:
The case of the Lipari Archipelago

Giovanni Ruggieri

Abstract
Private homes are a specific form of tourist accommodation often used in seaside
destinations, particularly on the islands.

An increasing use of private homes for tourism in small and medium size islands
could be due to the increasing levels of tourism, or used to offer a different ac-
commodation service, or, often today, to satisfy an upcoming tourist need.

Recent studies show that the importance of this phenomenon is no longer negligi-
ble. Tourism demand attracted by private accommodation offers an additional eco-
nomic impact for the islands and a new challenge for sustainability programmes.
The aim of this paper is to verify which the main economic impacts of this kind of
tourist accommodation are and if there is any difference between the behaviour of
tourists using private homes and those using registered accommodation structures.
A matrix was calculated to analyze tourists’ behaviour in the Eolian Archipelago
(Western Mediterranean), and their expenditure patterns.

The results seem to show that tourists choosing private homes have their own char-
acteristics in terms of expenditure behaviour and have the same strong impact as
the tourists using traditional tourist accommodation. We will also look at strategies
in order to increase benefits of this kind of offer, which is yet unsupervised.

Keywords: Private homes, tourist expenditure, islands economies

121
Giovanni Ruggieri

1 Introduction
Relationship between tourism development and social-economic and environmental
impacts in the islands have also been investigated by different authors (McElroy,
2003, Riley, 1995, Pigliaru, 1996, Concu, 2000) and from different points of view,
but all argue that tourism has a strong role in determining development patterns.

Islands are affected by structural problems and handicaps due to their insularity,
geographical isolation and low population density. The vulnerability of this terri-
tory (Briguglio, 1995) is also increased by tourism industry that, in most of the
small and medium islands (SMI), represents the prevalent economy (Manente,
Montaguti, 2004).

Tourism represents for SMI a single industry often tied to seasonality, with prob-
lems to carry capacity and with limited connections that reduce the international
tourism markets opportunity. SMI are also characterized by a relevant presence of
empty or underutilized private homes, caused by the people moving to bigger cit-
ies.

From these considerations, it could be interesting to know how a SMI accommoda-

tion system, based on private homes for islands, is used or could be better used for
tourism in order to develop additional tourist flows and to activate related econo-
mies.

In the first part of the paper we will present the characteristics of the Real Estate
Market in a Mediterranean Archipelago, trying to compare the tourist flow with the
ones generated from the second home market.

In order to study the impact of tourism in private homes, we investigated tourism

demand in the Eolian islands, a Mediterranean Archipelago, very well known for its
central position and for the beauty of the marine and volcanic landscapes. The ar-
chipelago is composed by seven small islands, different for tourism demand. Three
of them have an ancient tradition for tourism - therefore have many hotels - while
in others, tourism has just began no more than two decades ago, since their stan-
dards were low and uncomfortable (lack of electricity, lack of streets, lack of res-
taurants and hotels).

In the second part we introduce some results of the research done during the year
2004 (Parroco A. M., Vaccina F.; 2005) in the Archipelago, trying to delineate the
expenditure patterns and compare two kinds of tourist: the one who chooses tradi-
tional hotels and the one who spends his holidays in private homes.

122
 The economic impact of tourism in private homes: The case of the Lipari Archipelago

2 The real estate market in the Eolie Archipelago

The Eolian archipelago is composed by seven islands located in the Western Medi-
terranean Sea; it was added to the UNESCO heritage list and is perceived as a sole
tourist destination for holidays.

The tourist offer is composed by 88 hotels and 122 registered other types of ac-
commodations (Camping, country houses, agro tourism, B&B etc) for a total of
5.658 beds offered daily on 2004.

Other accommodation
Hotels Total
no houses

numbers beds numbers beds numbers beds

Eolie Archipelago 88 3.749 122 1.909 210 5.658

Table 1: Beds in hotels and other registered accommodation (2004)

As for the SMI, Eolie Archipelago presents a relevant number of private homes half
of them not steadily occupied, but all represent a formidable potential real estate
market for the Archipelago.

Houses occu- Houses not Houses stable Total beds

Total houses pied by resi- stable occu- rented to offered to
dents pied tourist tourists

Eolie Archipelago 10.130 5.144 4.949 1.200 4.800

Table 2: Number private homes rented to tourist and number of beds (2004)

At the local level, tourist authorities are well conscious of the phenomenon of the
private homes. In 2004 they estimated 1.200 homes available as extra beds for tour-
ists, these developed 4.800 beds more. It means that in the Eolian Archipelago tour-
ist offer is exactly divided in two parts: private homes (not registered) and hotels
and similar.

From the demand side, the table shows the total overnight per year generated from
traditional accommodation system (hotels and similar).

123
Giovanni Ruggieri

Hotels Other accommodation Total flows

Arrivals Overnights Arrivals Overnights Arrivals Overnights

Eolie Arcipelago
84,098 340,488 17,455 87,676 101,553 465,939

Table 3: Tourist flow on registered hotels ad registered accommodation (2004)

Preceding researches estimated to 234.056 the total overnight per year coming out
from private homes (S. De Cantis, Volo S. – 2004).

Looking at the dimension of the phenomenon, we present the occupancy rate sepa-
rately for traditional accommodation and for private homes.

Other accommodation Houses rented to

Hotels
no houses tourists

Beds 3,749 1,909 4,800

Overnights 340,488 87,676 234,056
Occupancy Rate year 00:25 00:13 00:13

Table 4: Occupancy rates registered and not registered accommodation (2004)

The occupancy rate result for private homes is similar to “other accommodation”.
Viewing the performance monthly, during the summer season, private homes reach
a higher average stay (15 days) than other accommodation (6 days), generating a
more than doubled result in terms of overnights.

This shows that homes today, more often rented during the summer season, repre-
sent an important reality for the tourist economy of the Archipelago, providing ad-
ditional tourist flows able to generate relevant local economies.

3 The survey in Eolie Archipelago

Starting from the relevant presence of tourism in private homes in the Eolie Archi-
pelago, a survey was conducted during the year 2004. The Research project, spon-
sored by the Italian Ministry of Research and from some private and public compa-
nies, determined the real dimension of tourist flows, including the ones in rented or
private homes.

124
 The economic impact of tourism in private homes: The case of the Lipari Archipelago

For this purpose 2.000 questionnaires were distributed in the main harbour of the
Eolie Archipelago during July and August 2004 to the tourists at the end of their
holiday. A sample design is described in the main research book (Parroco, Vaccina
2004).

The sample design was constructed considering two different kinds of tourist: the
unofficial and the official one. The two categories are identified according to the
following items, present in the questionnaires.

The classification, based on some aspects comparing the services provided from
traditional accommodations and the private homes, is useful to separate the two dif-
ferent kinds of tourists: the ones that chose homes and the others who chose holi-
days in registered accommodation that we called “official” because they are already
monitored by tourism statistics.

Spent holiday in registered accommodation (Hotel, residence, resort, agrotourism)

If he paid by credit card
Official tourist
If the accomodation provides a restaurant service or breakfast
If the accomodation has services related to the hotel
Un-official tourists
Spent holiday in private houses or friend’s house
(own house or
guest) Spend a holidays in private or friend’s boat
Un-official tourists Spent holiday in a rented home
(rent a house)
Paid by cash, or by money transfer

Figure 1: The identification of official and un-official tourist

The total valid questionnaires at the end were 1.839, divided in 1.103 filled out by
un-official tourist and 736 by official ones. The differences between these two
categories were calculated considering characteristics above, excluding the ones
that were in the Archipelago for daily visits.

4 Expenditure patterns
Comparing the expenditure patterns between official tourists and ones who rent a
vacation home, it is possible to confirm that the average expenditure per capita (to-
tal expenditure / tourist arrivals) is the same. It shows that tourist in homes spend a
similar total amount of money in the destination (not considering the expenses for
travelling to the Archipelago). Who rents a house takes a long stay vacation rather
than one who chooses hotel accommodations.

125
Giovanni Ruggieri

The daily average expenditure per capita [(Total Expenditure / arrivals)/overnights]

is less than one of an official tourist. Similar are the amounts calculated for the av-
erage expenditure per Diem (Total Expenditure/overnights).

Average expendi- Daily average ex- Average expendi-

Tourist typology ture per capita penditure per capita ture per die

Official tourists € 469.52 € 84.03 € 186.87

Un-official tourists (rent a house) € 468.30 € 64.26 € 155.50

Un-official tourists
(own house or guest) € 289.11 € 34.19 € 70.45

Table 5: Expenditure index by tourist typology (2004)

The tourism expenditure behaviour matrix describes some differences that are
strongly related to the percentage of unofficial tourist that are owners or friends of
the owners of second homes. They do not spend money for accommodation but
spend more for other services like food (0.37 compare to 0.23) or shopping (0.16
compare to 0.03).

Quite similar are the expenditure patterns for tourists who rent a home compared to
the official ones.

The matrix also describes that there is no a relevant difference in the behaviour be-
tween tourists using private accommodation and those using registered accommo-
dation structures.

Excursions
and cultural Other
Typology Transport Accommodation Food events Shopping categories
Official tourists 0.21 0.42 0.23 0.09 0.03 0.02

Un-official tourists
(rent a house) 0.23 0.41 0.21 0.08 0.02 0.05

Un-official tourists
(own house or guest) 0.27 - 0.37 0.10 0.16 0.11

Table 6: Tourist expenditure behaviour matrix

126
 The economic impact of tourism in private homes: The case of the Lipari Archipelago

Calculating the total overnights for each tourist type, with the above matrix, we
present the total expenditure matrix on the Eolie Archipelago.

Excursions
Accommo- and cultural Other catego-
Tourist typology Transport dation Food events Shopping ries
Official tourists 4,5941,213 92,451,221 50,579,087 18,835,897 5,753,590 4,725,382

Un-official tour-
ists (rent a house) 25,209,938 44,939,454 23,017,769 8,768,674 2,192,168 5,480,421
Un-official tour-
ists (own house
or guest) 4,612,461 - 6,357,529 1,734,660 2,775,456 1,908,126

Table 7: Total expenditure matrix

In terms of economic impact the matrix results in transport/accommodation/food

expenditures for unofficial tourists, who rent homes, equal to more than half the
same total expenditure of official tourists.

5 Conclusions
Today a large part of tourists requests holidays choosing private accommodations.
This shows the opportunity for a new market, often perceived as heterogeneous,
spontaneous, not intermediated, and with a low level of economic impact on tourist
destination.

Due to the increasing levels of tourism or just to offer a different accommodation

service, the underutilized homes tourism, in the case of the Eolie Archipelago, con-
stitutes an important and growing new factor for its tourist market. Research results
demonstrate the additional economic impacts provided from the tourism activities
connected to the rental house market. The disregard of the importance of this part
of the tourist offer is due to the lack of information regarding the rental or private
occupation of these homes, and also to the presence of unconventional travel inter-
mediaries such as the Web and the real estate agencies.

The presence of a strong seasonal tourist market, prevalently sustained by a tourist

demand coming from close regions and countries, determines the inconvenience to
register these forms of accommodation.

127
Giovanni Ruggieri

This consideration suggests a first kind of action directed to demonstrate the con-
venience of registering this type of tourism giving more opportunity to the local
businesses supported by the policies of local authorities. A second action could be
helping the local population to manage actual rental houses following new and pre-
cise tourism models related to the international market demand. The application of
these models could lead owners of unutilized homes to follow the tourist market,
consequently increasing tourism flows and reaching a higher level of bed capacity.

To achieve this we firmly believe that a local intermediary figure is necessary to

collect, to specialize and to manage these types of rental offers following the tour-
ism market rules. Finally to develop second homes market in the Archipelago we
do not have to lose focus on the relationality aspect, central to the tourist’s needs. It
means that private homes are able, if well managed from local people, to offer a
“human touch” to the tourist experience. Further research could investigate on the
repeat tourism business deriving from this rental house market.

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 The economic impact of tourism in private homes: The case of the Lipari Archipelago

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 Developments in real estate and tourism in Alpine
winter sports destinations: The case of the
Styrian ski resort Schladming

Otto Bammer, Patrick Hainzl, Michael Mair & Daniela Wagner

Abstract
Real estate as well as tourism industry plays a vital role in Austria’s economy. Site-
related various independences have an enormous impact on a destinations’ devel-
opment.

The purpose of this study is to identify and examine factors that influence real es-
tate prices and the development of tourism in Alpine winter sports destinations.
Specifically, this study analyzes the development of Tourism and real estate in
Styrian ski resort Schladming in the last fifteen years.

The results demonstrate that both tourism and real estate market are affected by
nearly the same factors. Internal drivers are permanent investments in (tourist) in-
frastructure. External drivers are guest structure modifications and threats by cli-
mate changes. With the high concentration in one economic sector, both tourism
and real estate show a lack of innovation. Moreover this study could be seen as in-
tervention to encourage change and development.

Keywords: Tourism development, real estate development, real estate prices,

winter sports destinations, drivers of development

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Otto Bammer, Patrick Hainzl, Michael Mair, Daniela Wagner

1 Introduction
Both the real estate and tourism industries play a significant role in the Austrian
economy (Gruber & Hromas, 2007; Czerny & Weingärtler, 2007). Real estate loca-
tions develop in parallel to regional economic development cycles and only to a
limited extent in parallel to the business cycle of the national economy (Cerny &
Wagner, 2003). Regions are increasingly dependent on industry and corporate cy-
cles. One of the key elements in the analysis of macro-locations is the situation and
development of the region in terms of social and economic structure.

This is because the criterion is not the supply or demand for space, but economic
development based on the factors which characterize the economy of the region
(Muncke & Rybak, 2006). In real estate location analysis, a distinction is drawn be-
tween “hard” and “soft” location factors (Schulte et al. 2005). In spatial terms, a
distinction is drawn between the macro and micro location (Muncke & Rybak,
2006).

Figure 1: Structure of real estate location analyses

Source: adapted from Muncke & Rybak, 2006

In this context, it is necessary to pay special attention to price elasticity, with a

clear focus on the three central factors of the market mechanism: supply, demand
and prices (Muncke & Rybak, 2006).

Developments in tourism are influenced by a variety of factors. Traditional system

theory approaches assume that many networked links and subsystems exist within a
tourism system, and that a tourism product is composed of many partial services
(Bieger, 2004, borrowing from Kaspar, 1996). The principles of modern system
theory serve to incorporate the element of dynamics in the system of tourism,
which is influenced and altered by certain events (Bieger, 2004).

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 Developments in real estate and tourism in Alpine winter sports destinations

Tourism development depends on whether a location is able to meet the visitors’

needs. The factors which influence this ability include the original or basic offer
(i.e., natural and geographical situation, historical/cultural situation, socio-cultural
conditions, general infrastructure) and the derived offer (commercial tourism of-
fers, public tourism offers, tourist information). Under the heading of location-
promoting factors in tourism, measures to restrict traffic and transport, hous-
ing/settlement policies and morphological harmony in the town’s profile are gain-
ing increasing significance (Luft, 2007).

Austria’s tourism destinations in the Alpine region are in a state of upheaval. Ski-
ing and winter sports tourism has undergone an enormous transformation. Changes
in visitor behavior, lower airline ticket prices and the resulting increase in global-
ization (Hartl, 2002) as well as high price transparency and intensified competition
from new resorts have posed new challenges for Alpine tourism destinations
(Bieger, 2004).

One of the main disadvantages in Alpine tourism is the compact structure of the ho-
tel industry and the frequently insufficient size of hotels. From a business stand-
point, the development of clearly distinguished tourism destinations where key
parts of tourism offerings are controlled by a single economic actor is being propa-
gated (Hartl, 2002). This would drastically reduce the number of ski areas. It also
raises the question of whether this scope of consideration is sufficient, as economic
and regional, social, cultural and ecological perspectives are neglected (Bätzing,
2002 and Klein, 2007).

From an ecological perspective, climate change is forcing tourism destinations to

take action. Recent studies on climate change paint a bleak picture of the future of
winter sports destinations in the Alpine region. In recent years, warming in this re-
gion has been approximately three times as high as the worldwide average. Accord-
ing to climate models, even greater changes can be expected in the coming decades,
including a decrease in snow cover at lower altitudes (Agrawala, 2007). Pröbstl
(2007) puts these negative predictions into perspective and explains that such blan-
ket statements have an unfavorable impact on winter sports destinations. Using re-
gionally adapted information, it is possible to attain results which differ from those
generalized negative statements in many ways. Changes in the natural surroundings
have an impact on the attractiveness of tourism destinations and lead to changes in
the value of hotel properties and second apartments (Wegelin, 2006).

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Otto Bammer, Patrick Hainzl, Michael Mair, Daniela Wagner

2 Methods
This study focuses on Schladming, a popular ski resort in Austria. The municipality
of Schladming (745 m above sea level) is located in the Liezen district in the prov-
ince of Styria. Geographically, Schladming covers an area of 10.3 sqkm at the con-
fluence of the Talbach and Enns Rivers in the Upper Ennstal Valley. The town is
skirted by the Dachstein Mountains to the north and the Niedere Tauern mountains
to the south. Schladming has a population of just more than 4,500 (Municipality of
Schladming, 2008). The development of tourism in Schladming began in the early
1970s, and in 1982 the town hosted the Alpine World Ski Championships. Schlad-
ming and Ramsau are among the leading tourist destinations in the district of
Liezen (Statistics Austria, 2007). The purpose of this study is to identify and exam-
ine those factors which influence real estate prices and the development of tourism
at winter sports destinations.

This research project involves a qualitative study which employs a retrospective re-
search design as well as triangulation and was conducted in three stages between
2007 and 2008: group discussion, field interviews and analysis of structural data
and artifacts.

Triangulation can be regarded as a systematic expansion and completion of poten-

tial insights. It not only serves to validate the results and methods applied, but also
increases the breadth, depth and consistency of the methodological approach (Flick
2007, with reference to Denzin & Lincoln, 2000). The retrospective research design
makes it possible to analyze specific events and processes on the basis of their sig-
nificance for individual or collective developments over time.

Bohnsack (2005) pointed out that group discussion is used when the methodologi-
cal significance of interaction, discourse and group processes for the formation of
opinions as well as orientation and significance patterns are based on an underlying
theoretical model. Participants were asked to discuss in detail which influencing
factors and processes were decisive in the development of Schladming as a destina-
tion during the study period (1992–2007). The discussion group included two par-
ticipants from local tourism businesses, two members of local tourism institutions,
two representatives from the real estate industry and two representatives from the
municipal government. A total of three rounds of discussions were carried out. The
discussions focused on influencing factors from the tourism and real estate indus-
tries as well as other influencing factors. The results were combined to form a fac-
tor model and included in the interviews as a retrospective framework.

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 Developments in real estate and tourism in Alpine winter sports destinations

A total of 20 narrative interviews were carried out. In order to be included in the

sample, interviewees had to have an interest in the topic and to have made Schlad-
ming the focus of their vital and/or professional interests for the last 15 years or
more. The objective of the narrative interviews was to compress, reflect on and
complement the results attained in the group discussion. The interviewees were
asked to express their personal views in the question “From your perspective, what
key factors and processes have been decisive in Schladming’s development in the
last 15 years (1992–2007)?”. The narrative interview technique does not involve
confronting the interviewee with standardized questions; instead, the objective is to
encourage the interviewee to speak freely (Mayring, 2002). Any agreement with
factors identified in the discussion group was noted during the interview.

Factors not explicitly mentioned by the interviewees were queried directly at the
end of the interview (Mayring, 2002). During the analysis stage, the interviews
were transcribed and the following categories were created on the basis of the
statements made:

“Tourism-related influencing factors and processes” cluster:

Summer/winter offerings, accommodations/beds, local residents/visitors, accom-
modation markets, tourism organizations, tourism infrastructure/traffic and trans-
port.
“Real estate-related influencing factors and processes” cluster:
Private real estate, commercial real estate, town profile/development
“Other influencing factors and processes” cluster:
Education, local politics, environment/quality of life/climate, economic develop-
ment/population

In parallel to the interviews, structural data and artifact analysis was carried out.
The analysis of structural data involves an approach based on formal, external
characteristics. Such characteristics provide static images with regard to internal or
external framework data and make it possible to compare data collected in inter-
views with independent data and to analyze distortions and their possible causes
(Froschauer & Lueger, 2006). Artifacts refer to the material products of human ac-
tivity and provide the analyst with information on social relations and societal con-
ditions (Froschauer & Lueger, 2006).

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Otto Bammer, Patrick Hainzl, Michael Mair, Daniela Wagner

In the analysis of real estate prices, it was not possible to fully survey all categories
of real estate due to a lack of available data. Data on the development of condomin-
ium prices in Schladming (new as well as previously inhabited apartments) during
the study period (1992 to 2007) was analyzed. As a methodological complement,
comparative price data was derived from the annual real estate price indicators pub-
lished for the district of Liezen (Vienna Chamber of Commerce, 2000-2007). These
real estate price indicators are based on annual market surveys which the relevant
trade association carries out among its member businesses (approximately 7,500
throughout Austria). The following property categories are included in the survey:
Residential real estate: building lots for detached family houses, new and previ-
ously inhabited condominiums, semi-detached houses, single-family houses, rental
apartments not subject to legal rent control. Commercial real estate: Lots for the es-
tablishment of new businesses, rent levels for office space, rent levels for commer-
cial space. However, this data on the district of Liezen is only available from 2000
onward.

3 Results
The results reveal the significance of the following categories for the development
of Schladming:
(1) Summer / Winter offerings,
(2) Accommodations / beds,
(3) Infrastructure (tourism infrastructure / transportation),
(4) Source markets,
(5) Local residents/visitors,
(6) Local politics,
(7) Tourism organizations,
(8) Town profile / development,
(9) Real estate (commercial / private),
(10) Economic development / population,
(11) Education,
(12) Environment / quality of life / climate.

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 Developments in real estate and tourism in Alpine winter sports destinations

Summer / Winter offerings

Winter Summer
1973 1991
1982 Ski vor
1.World Cup 1.Race US
WC 1992
Race Pro Tour
1992
Special 2. Race US
1993
Olympics Pro Tour
3. Race US
1994
Pro Tour
4. Race US
1995
Pro Tour
Night Race 1996
Alpine Ju- WASBE Planai
Night Race 1997
niors WC Festival Classic
1. MID Planai
Night Race 1998
Europe Classic
2. MID Planai
Night Race 1999
Europe Classic
3. MID Planai
Night Race 2000
Europe Classic
4. MID Planai
Night Race 2001
Europe Classic
5. MID Planai
Night Race 2002
Europe Classic
6. MID Planai
Night Race 2003
Europe Classic
7. MID Planai Mountain-
Night Race 2004
Europe Classic bike WC
Wild Water
8. MID Planai Mountain-
Night Race 2005 Hiking
Europe Classic bike WC
Adventure
Wild Water
9. MID Planai Mountain- Hiking
Night Race 2006 Hiking
Europe Classic bike WC WC
Adventure

Night Race Wild Water

10. MID Planai Mountain-
2007 Hiking
Europe Classic bike WC
Adventure

Figure 2: Main events from 1992 to 2007

Source: authors’ survey, 2008

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Otto Bammer, Patrick Hainzl, Michael Mair, Daniela Wagner

The development of tourism in Schladming began with the commercial develop-

ment of the mountains from 1973 onward. The initial trigger for continuing devel-
opment in tourism was the Alpine Ski World Championships in 1982. In the re-
spondents’ view, hosting winter sporting events, in particular the "Night Race"
which has been carried out each year since 1996, the men’s slalom event in the Al-
pine Ski World Cup and the Special Olympics in 1993, has had the greatest impact
on the development of Schladming as a tourist destination. These events’ contribu-
tion to enhancing Schladming’s profile and image has been decisive in this context.

4 Accommodations / Beds
1200 Guest Capacity (number of beds) by category

1000

800
Number of beds

600

400

200

0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

4/5-Star 3-Star 2/1-Star

Commercial holiday apts./houses Private holiday apts./houses Private rooms / farm holidays
Youth hostels/recreation homes Campground

Figure 3: Number of beds by category

Source: Schladming-Rohrmoos Tourism Association, 2008

In qualitative terms, Schladming’s capacity is too low in light of the Austrian trend
toward high-quality tourism (Statistics Austria, 2008). In quantitative terms, the in-
terviewees stated that the town’s capacity is sufficient. Existing accommodation fa-
cilities have continuously invested in increasing their quality over the last three to
five years. However, there is a lack of investors for new projects in this quality
category.

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 Developments in real estate and tourism in Alpine winter sports destinations

4.1 Infrastructure
The Alpine Ski World Championships in 1982 also represented the initial trigger
for the development of tourism infrastructure in Schladming. According to the in-
terviewees, further development in this area was driven by the local lift operator,
not by local hotels. The merger with the neighboring ski areas to form a four-
mountain ski network and the takeover of a nearby ski area on the Dachstein glacier
are considered to have been strategically important steps. Investments in lifts and
snowmaking equipment have also served to secure the quality of Schladming’s
tourism infrastructure. The available leisure activities benefit visitors and local
residents alike.

Schladming’s geographical location in a valley as well as the town’s scarce prop-

erty resources has exacerbated the negative effects of increasing traffic volumes.
Noise, harmful emissions and heavy traffic have increased markedly over the years.

4.2 Source markets

The interviewees indicated that Schladming’s classic source markets such as Ger-
many and the Netherlands have lost significance, although they are still considered
the most important. With the opening up of countries to the east of Austria, new
groups of visitors have been attracted to Schladming. From a business standpoint,
this is considered a positive development; nevertheless, there are still fears that
visitors from Eastern Europe will reach excessively high numbers and push out
other target groups. The need to accommodate new requirements and expectations
among guests as well as language problems and clichéd prejudices also increase the
difficulties of dealing with visitors from Eastern Europe and Russia.

4.3 Local residents / Visitors

In their self-image, the local residents explicitly emphasize their hospitality and
friendliness toward visitors. However, not everyone sees a balanced and healthy
development in the interaction between local residents and visitors. According to
the interviewees, the reasons for the increasing reticence can be found in the ten-
dency toward a more quantitative orientation in tourism at the expense of tradition
and identity. More international target groups and the resulting communication
problems have fostered more differentiated relationships to visitors. Unlike visitors,
local residents have to bear price increases throughout the year. In the interviewees’
opinion, both the local government and tourism industry decision-makers are re-
sponsible for creating a more balanced relationship by means of increased internal
marketing.

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Otto Bammer, Patrick Hainzl, Michael Mair, Daniela Wagner

4.4 Local politics

Municipality of Schladming
Election Results 1995-2000-2005 (seats)

60,00%

50,00%

40,00%
1990
1995
30,00%
2000
2005
20,00%

10,00%

0,00%
People' Party Social Freedom Party Green Party Local Party
Democrats

Figure 4: Political distribution

Source: Municipality of Schladming, 1995-2005

V ote r par ticipation 1990 to 2005

0,88
0,86
0,84
0,82
0,8
0,78
0,76
0,74
0,72
0,7
0,68
1990 1995 2000 2005

Figure 5: Voter participation

Source: Municipality of Schladming, 1995-2005

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 Developments in real estate and tourism in Alpine winter sports destinations

Schladming’s local politicians are clearly committed to the town’s orientation to-
ward tourism. From the interviewees’ perspective, the political climate is consen-
sus-oriented, geared toward stability and characterized by few changes. The con-
servative majority has prevailed in Schladming’s local government for
approximately 30 years now. In the municipal council elections in 2005, a genera-
tion change took place within the conservative camp. In local political activities,
small-scale regional thinking has become increasingly prevalent.

4.5 Tourism organizations

Not unlike Schladming’s local government, local tourism association structures are
also perceived as fairly static and stable. It was not until the individual associations
in Schladming and Rohrmoos merged into a joint association and marketed the ski
area through the Schladming-Dachstein marketing association that the efficiency of
tourism structures increased. Schladming’s position as a winter sports destination
and the events held there have also served to enhance the destination’s profile and
image.

4.6 Town profile/development

In 1993, nearly 74% of the population supported the transformation of Schlad-
ming’s main square into a pedestrian zone (Municipality of Schladming, 1993).
From the interviewees’ perspective, the mix of industries is too heavily oriented
toward tourism. Grocery retailers have moved their business premises to the edges
of town. The frequency of visitor traffic – both guests and local residents – in the
area around the main square has decreased. This low traffic and the high rent levels
in that area have repeatedly left commercial spaces empty. For the sake of compari-
son, it is important to note that rent levels for commercial space have been declin-
ing at the district level since 2003 (Vienna Chamber of Commerce, 2000-2007).

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Otto Bammer, Patrick Hainzl, Michael Mair, Daniela Wagner

4.7 Real estate

Development of real estate prices in the district of Liezen
(excellent location, very well-appointed properties)
2.200,00

2.000,00
Purchase price in € per m² of usabl

1.800,00

New condominiums
Previously inhabited
1.600,00 condominiums
Semi-detached houses
Single-family houses

1.400,00

1.200,00

1.000,00
2000 2001 2002 2003 2004 2005 2006 2007
Calendar years

Figure 6: Development of residential real estate prices in the Liezen district

Source: Vienna Chamber of Commerce, 2000-2007

With the exception of single-family houses, a buoyant upward trend characterized

all categories of residential real estate from 2002, while prices for previously inhab-
ited condominiums began to decline from that year onward. New condominiums
and semi-detached houses have seen sustained and even increasing price levels. In
contrast, previously inhabited condominiums have lost in value since 2004. Single-
family houses only began to show noticeable increases in value in 2004, but then
began to decline again in 2006.

Building lots for single-family houses saw prices increase starting in 2002, and
their price level has remained fairly constant since 2004. Commercial lot prices
shot up between 2003 and 2004, but they have now even fallen below their level
from the year 2000.

Rent levels for rented apartments have stagnated since the year 2000, whereas of-
fice rent levels have recorded a moderate increase. Rent levels for commercial
space have been declining since 2003.

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 Developments in real estate and tourism in Alpine winter sports destinations

The development of condominium prices (both new and previously inhabited) was
compared to the corresponding development throughout the district of Liezen. For
reasons related to data protection law regarding the transactions cited for Schlad-
ming, no absolute prices are indicated; the absolute value (average price) of very
well-appointed condominiums at excellent locations in Schladming in 1992 was set
to 1.00, and the ensuing absolute prices were placed in relation to that point of ref-
erence.
Condominium prices (Liezen overall and Schladming)

2,50

2,00
Relative Price development

1,50
New condominiums (Schladming)

Previously inhabited condominiums

(Schladming)
New condominiums (Liezen)
1,00
Previously inhabited condominiums (Liezen)

0,50

0,00
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Calendar years

Figure 7: Prices of condominiums in Schladming and throughout the Liezen district

Source: authors’ survey, 2008

Here it becomes clear that the prices for both new and previously inhabited condo-
miniums in Schladming have been above the price level for the Liezen district since
2002 or longer. While the price level for new condominiums in Schladming has
been increasing noticeably since 2004, the reference values for the entire Liezen
district have apparently remained unchanged since that time. In the case of previ-
ously inhabited condominiums in Schladming, the price increase has been mark-
edly smaller than in the case of new condominiums, while the reference prices for
previously inhabited condominiums throughout the Liezen district have clearly
been declining since 2004. In general, therefore, we can conclude that the market
for condominiums in Schladming exhibits higher price levels than in the overall
district of Liezen.

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Otto Bammer, Patrick Hainzl, Michael Mair, Daniela Wagner

The interviewees indicated that commercial real estate prices have increased
sharply in recent years. This development is attributed to the scarce property re-
sources in the municipality and increased pressure from the hotel sector. Specula-
tions regarding a World Cup bid were also cited as a reason for increased prices.
Local residents are taking advantage of the opportunity to sell real estate at a profit.
Only little intervention is performed to control property prices. In private real es-
tate, the interviewees indicated that the available living space has increased, while
room for improvement is identified in subsidized housing. For the acquisition and
construction of condominiums or single-family houses, there are only limited offers
at very high prices; this has brought about increased migration to more favorably
priced municipalities in the area. The high real estate prices are connected to devel-
opments in tourism infrastructure. An increase has been observed in second resi-
dences in Schladming. These residences are usually only used for four to six weeks
per year, thus contributing little to the local economy.

4.8 Economic development/population

The municipality of Schladming had more than 425 employers and 2,786 employ-
ees in 2001. Compared to 1991, this represents an increase of 16.8% in the number
of employers and 13.6% in the number of employees. Most of the businesses are in
the fields of retail commerce and motor vehicle repair, with 103 employers and
5.16 employees on average (Statistics Austria, 2008). In 2001, the resident popula-
tion of Schladming came to 4,570 inhabitants, up 4.4% compared to 1991. Between
2004 and 2006, Schladming’s population decreased by 1.1% (Styrian Provincial
Government, 2008).

The interviewees see tourism as the main driver of the economy in Schladming.
The tourist attractions on offer have been expanded constantly and well received,
which has brought about economic growth and increasing wealth. This strong focus
on tourism has resulted in a situation where professionals with high qualifications
or academic degrees from other fields are unable to find work and thus move to
other areas. This development has not been offset by the arrival of new residents in
recent years.

The general income situation is assessed positively over the survey period. The
various areas of the local economy are predominantly dependent on the winter sea-
son, which is especially problematic for retail commerce given a high season of
only three to four months.

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 Developments in real estate and tourism in Alpine winter sports destinations

4.9 Education
The town of Schladming has well-structured educational offerings with regard to
primary and secondary schools. In the segment of vocational secondary schools,
Schladming also has a ski trade school and has offered a preparatory course for
secondary school leaving exams since 1996. As regards adult education, various
courses are offered at the local institute of continuing education (Municipality of
Schladming, 2008).

The interviewees commented favorably on primary and secondary schooling in

Schladming. The lack of structures in general and vocational secondary school
forms as well as the sparse offerings in the field of adult education were assessed as
weaknesses. The lack of development in educational structures and the resulting
low level of innovation are attributed to the town’s heavy focus on tourism.

4.10 Environment / quality of life / climate

In the interviewees’ opinion, Schladming enjoys a very high quality of life, which
at the same time is largely taken for granted. These standards are perceived to be
compromised by the increasing number of visitors and increased noise pollution
due to the more intensive use of snowmaking equipment. All of the interviewees
have recognized changes in the climate. While some dismiss this as excessive pes-
simism, others see the effects of climate change (e.g., higher temperatures and
greater fluctuations in snowfall) on tourism development and especially the need
for more artificial snow. However, Schladming’s geographically favorable location
and its local climate conditions must be accounted for in the current discussion on
climate change.

5 Conclusion
The natural surroundings of Schladming are hardly considered a development fac-
tor by local residents. Differing responses arise only in problem areas (noise from
snowmaking equipment, traffic problems in town). Depending on their relationship
to the tourism industry, local residents assess the situation as questionable, and in
other cases they dismiss problems as excessively pessimistic.

The development of tourism offerings began with the commercial development of

the mountains for Alpine sports. Subsequently, major winter events helped enhance
the region’s image. The development of summertime offerings has only begun in
recent years, and the proven strategy of hosting major events has also been applied
in this area.

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Otto Bammer, Patrick Hainzl, Michael Mair, Daniela Wagner

There is general consensus that the tourism industry in Schladming mainly lacks
high-quality accommodations, and that occupancy and capacity utilization are too
low. Specific investments to increase the quality of accommodations are currently
being planned. The "Hohenhaustenne", an event venue opened in 2007 with a ca-
pacity of 1,500 guests, was hardly mentioned by the interviewees. The predominant
target image appears to be one of visitors interested in quality, and the attractions
offered tend to be large-scale events.

Due to the opening of markets to the east and the economic situation in Germany,
Schladming’s source markets have changed over the last ten years. With a com-
bined share of over 70%, however, Austria and Germany account for the majority
of visitors to Schladming. The increased number of visitors from Eastern Europe –
especially from Russia – and the increased number of visitors from Great Britain is
irritating to many locals in Schladming. In terms of language as well as tourism in-
terests, these new visitors make different demands compared to the usual German
visitors. Existing strategies are not sufficient in order to overcome the current chal-
lenges in a sustainable manner, but new paths have not yet been found.

The political conditions in Schladming are highly consensus-oriented, very stable

and not particularly dynamic. There is agreement on the fact that tourism is the
town’s mainstay and many actions are oriented toward tourism-related needs. Other
business areas have hardly developed, and no activity can be observed in new busi-
ness sectors.

The average capacity utilization of Schladming’s tourism industry is barely over

30%. In this context, the losers are small enterprises in tourism as well as retail
commerce and trades.

The development of Schladming’s main square appears to be symptomatic of these

circumstances. The pedestrian zone, which was supported by a vast majority of lo-
cal residents, now suffers from a lack of visitor traffic. The shopping facilities for
local residents have moved to the edge of town, and tourism demand is too low to
justify sustained business activity.

As mentioned above, only data on the development of condominium prices in

Schladming was made available. Compared to the corresponding values for the
overall district of Liezen, this data shows that the market for condominiums in
Schladming enjoys substantially higher price levels and obviously holds further po-
tential for growth than the rest of the district.

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 Developments in real estate and tourism in Alpine winter sports destinations

The number of holiday apartments and houses in Schladming has also seen sub-
stantial growth, which is probably also due to the fact that short-term rentals to
tourists – even with occupancy for only a small part of the year – are generally
more profitable from a real estate business standpoint than long-term rentals which
satisfy primary housing needs.

The population of Schladming is decreasing. This can be explained by the depar-

ture of local residents who can not afford or do not wish to pay the price for pri-
mary housing in Schladming. In addition, it is very difficult to find employment in
economic sectors outside of the tourism business.

During the study period, it was practically impossible to detect any innovation in
the real estate business (i.e., the development of usage forms other than tourism).
Due to the favorable situation with regard to income from tourism, there has proba-
bly not been sufficient reason for such innovations. Although it is beyond the scope
of this study, in the long term it cannot be ruled out that retaining this high level of
tourism specialization without developing alternative scenarios may become prob-
lematic if the currently favorable (but uncontrollable) general conditions become
unfavorable at some point in the future.

Schladming’s tourism organizations are very active and reflect the political condi-
tions in the town. Their impact on development could not be identified explicitly.
However, the role of the local lift operator was highlighted repeatedly as the driv-
ing force behind many developments.

Local education is almost exclusively in the primary and secondary segments, and
there is no general secondary school. The local institute of continuing education
provides adult education courses. However, continuing education is not regarded as
a strategic development factor.

In summary, we can state that the main internal driver of development in Schlad-
ming is the local lift operator, and changes in visitor types and the threat of climate
change could be identified as external factors influencing development. In the
course of the development workshop to be held in cooperation with the local gov-
ernment of Schladming, internal marketing and the innovation climate will be
pointed out as key issues. The willingness to innovate can be increased by observ-
ing external challenges more closely and by allowing internal contradictions. This
study can also be regarded as a form of intervention which may trigger changes. In
particular, it is necessary to rethink the processes involved in generating innova-
tions (Zollo & Winter 2002). Sustainable development should also be able to depart
from the usual strategies and not just produce “more of the same”.

147
Otto Bammer, Patrick Hainzl, Michael Mair, Daniela Wagner

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148
 The socio-economic and environmental impacts of
second home tourism:
The South Pacific Coast of Nicaragua example

Xavier Matteucci, Dagmar Lund-Durlacher & Matthias Beyer

Abstract
Attractive coastal regions of Central and South America have recently experienced
a rapid growth of second home developments. Informed by the experiences of
Europe and the Americas, this paper examines the socio-economic and environ-
mental impacts of second homes on the South Pacific Coast of Nicaragua. The
main impacts include conflicts with local and indigenous communities over land
use and ownership, seasonal and low-income employment generation, an increased
burden of municipal budget to provide public infrastructure, and environmental
degradation. It is argued that the second home tourism sector, strongly driven by
private real estate investors, fails to generate tourism activities which are expected
to sustain community development. Furthermore, this study indicates that munici-
palities concentrating on the second home tourism segment may deprive access to
resources to other forms of tourism activities.

Keywords: Second homes, impacts, tourism development, developing economies

1 Introduction
Over the past several decades, an increasing demand for holiday homes has blos-
somed throughout southern regions of Europe and the Americas. Based on the as-
sumed benefits of tourism, public authorities – accompanied by private stake-
holders – have seen this phenomenon as a major contributor to regions’ economies.
Second home tourism has been an issue within tourism research since the early
1970s. At that time, second homes developed for tourists began to spread on the
Spanish and other Mediterranean coastal regions. Second home tourism, a new
form of tourism, appeared and flourished due to the development of the welfare
state, which was characterized by more free time, earlier retirement and more gen-
erous pensions (Aledo and Mazón, 2004).

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Xavier Matteucci, Dagmar Lund-Durlacher, Matthias Beyer

Despite the growing importance of second home tourism worldwide, one of the
main loopholes in terms of tourism is the severe lack of information relating to this
segment. However, some figures are parsimoniously available, which help estimat-
ing the extent of the phenomenon in some specific areas. For instance, in Spain,
non-residents purchased 90,000 homes in 2002 with a value of 5.676 million Euros,
a 16% increase from the previous year. Of those tourists purchasing homes, nearly
half were British and 28% were German (www.andalucia.com). Around 75% of the
accommodation capacities for tourists in Spanish coastal areas (including Balearic
and Canary Islands) caters to the second home tourism sector, while only 25% con-
sists of hotel accommodation (Exceltur, 2005).

In France, second homes for tourists accounted for about one-tenth of all houses in
2003, about 3 million houses in total, – the majority (7.9%) of those owned by Brit-
ish nationals (Calzada, et al., 2004). In the Provence-Alpes-Côte d’Azur region, the
second home segment is currently estimated to be the first accommodation type by
far and occupies two-thirds of the entire lodging capacity (Insee, 2007). However,
many studies on the socio-economic impacts of second home tourism on the host
communities address the positive and negative effects of such developments
(Müller, 2001; Mateu I Lladó, 2003; Bevan and Rhodes, 2005; Hiernaux, 2005 and
Visser, 2004a, 2004b and 2006).

It is therefore necessary to investigate whether second home tourism is a catalyst

for tourism development in peripheral areas. In other words, does second home
tourism have less of an impact on the environment and to the host community than
conventional tourism? The purpose of this paper is to discuss the threats and oppor-
tunities associated with the development of the second home tourism sector for the
host communities in developing countries. The main focus is set on the potential
socio-economic and ecological impacts, as exemplified in the case study of Rivas, a
Department in the southern part of Nicaragua.

2 Definitions
Previous studies provide varied definitions of second home tourism (De Wilde,
1977; Marsden, 1977; Goodall, 1987; Mellett, 2003 cited in Visser, 2004a), which
apparently fail to be widely and commonly embraced by academics and other tour-
ism bodies. However, second home tourism, also frequently referred to as residen-
tial tourism or holiday homes, entails the usually accepted notions of long-term
stay, occasional residence and property ownership. Therefore, second home tour-
ism can be understood as an economic activity that is dedicated to the urbanization,
construction and sale of houses that make up the holiday home sector whose pro-
prietors or tenants spend the summer or reside intermittently outside their habitual
place of residence.

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 The socio-economic and environmental impacts of second home tourism

Within this frame, closed residential communities - whether gated or not - are also
considered. Gated communities, particularly abundant in North America, have been
described by social scientists as a new trend of residential development, both a
physical and obvious expression of post-industrial societal changes. Le Goix (2003)
commented that “gated communities represent a new form of urbanism where pub-
lic space is privatized”. In the scientific Spanish literature, Aledo (2008) presents
this new form of residential development as the New Residential Tourism (Nuevo
Turismo Residencial). He describes it as a new touristic “bubble” where the all-
inclusive resort concept is applied to second home tourism. In the Spanish context,
Aledo differentiates this new form of residential tourism from its former one by the
abolition of nature to a new touristic territory where nature is commercially tailored
for tourists (referred in Spanish as natura turistizada).

Finally, Torres Bernier (2003) suggests that the term residential tourism entails a
contradiction in itself, since, by definition, a resident is not a tourist. One can fur-
ther critically point out that this form of tourism consists of, by essence, little tour-
ism, but is an extensive real estate activity. Such an extensive activity may affect a
destination image and harm other forms of tourism developments. In any case, a
common characteristic of holiday home tourism is the search for the ideal spot,
which usually translates into sun, sea and privacy/security to wealthy city dwellers
mainly from northern regions of the industrialised world. This has brought private
investors not only to urban areas, but also to remote villages (Pessoa Silva and Lis-
boa Nobre, 2007; Aledo 2008) with the claim that tourism will benefit all classes of
the host communities through the multiplier effect. Despite the obvious positive
economic impact of tourism, holiday homes can have significant implications on
local communities.

3 Methodology
The article includes an academic reflection on the experiences with second home
tourism in Europe and the Americas, as well as an analysis of the present situation
of residential tourism in the South Pacific Coast of Nicaragua. Besides an extensive
review of Spanish, French and English academic literature, secondary data from the
Rivas region were examined. Nicaraguan press releases from the main two national
papers, namely La Prensa and El Nuevo Diario, were scanned to add congruence to
the local debates and opinions collected. In-depth, semi-structured interviews and
participant observation were used to collect additional qualitative data. Twenty-one
decision makers and tourism officials were interviewed in the months of January
and February 2007. The interviewees were representatives from the local govern-
ment, ministry of tourism and local tourism industry.

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Xavier Matteucci, Dagmar Lund-Durlacher, Matthias Beyer

Themes discussed during the interviews include: repondents’ knowledge about sec-
ond home tourism (key facts, investors and second homeowners’ characteristics),
real estate market and construction regulations, expected socio-economic and envi-
ronmental impacts, existing and/or necessary instruments for good governance, as
well as expected implications of future second home developments. Furthermore,
on-site observation of selected development projects, which were either in a con-
struction phase or were already completed, took place over the same period in the
municipalities of Rivas, San Juan del Sur and Tola, Nicaragua. The following sec-
tion presents the empirical realities of the case study area. To support our findings,
both the case study and past scientific studies on second home tourism have been
synthesized under one section.

4 Context of research
The municipalities of San Juan del Sur and Tola are located in the department of
Rivas, in the far southwest of Nicaragua. Rivas borders Lake Nicaragua (the 10th
largest lake in the world and also home of the only freshwater sharks) and the Pa-
cific Ocean. Its northern boundary is Rio Ochomogo, and its southern border is
Costa Rica. The region of Rivas has a population of about 167,000 and its economy
is mainly based on tourism, cattle ranching and agriculture. Despite a recent boom
of tourism activities in the region, unemployment is still high. According to local
figures, up to 28% of the local population of Tola immigrate to Costa Rica each
year in search of better job opportunities (La Prensa, February 25th 2005).

During the last few years, both foreign and domestic investments have fuelled
large-scale apartment and holiday house projects along the coast of San Juan del
Sur and Tola. According to Espinosa (2007), in Tola alone, there are about 13 cur-
rent residential tourism projects. Some of them have already been completed; some
are still in the construction phase and some are still being designed. Condo Hotel
Villas de Palermo, Rancho Santana, Arenas Bay Town and Iguana Beach - among
other projects – indulge one’s appetite for luxury as condominiums and villas sell-
ing for as much as $750.000 have been designed and built to fulfil the expectations
of wealthy foreign retirees (La Prensa, December 14th 2006). Some of the pro-
claimed forthcoming developments include the construction of a marina, a confer-
ence centre, shopping facilities, a private beach club and even a golf course.

The rapid growth of the second home tourism segment showed irregular and dislo-
cated patterns of development. Some criticism by local communities came about, as
houses and recreation complexes were proliferating outside a regulated and moni-
tored frame of construction standards and public policies.

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 The socio-economic and environmental impacts of second home tourism

In 2006, a study was commissioned by the Association of Municipalities of Rivas

(AMUR) in an attempt to palliate the increasing discontent and provide municipali-
ties with tools to better manage future developments. In the following sections, the
socio-economic and en-vironmental impacts identified are presented. References to
similar impacts from the literature are linked in to our findings.

5 Socio-economic impacts
Within three years, in San Juan del Sur and Tola, foreign real estate developers
have acquired vast amounts of land at an extremely low price, have erected luxuri-
ous holiday homes and sold them at expensive prices to North American and Euro-
pean buyers. Since the mid-nineties, speculative transactions have been escalating,
boosting coastal land prices from US$ 300 to up to US$ 280,000 per hectare
(Bonilla and Mordt, 2008). Due to the prevailing poverty in the region, uneducated
farmers often willingly sold their plot of land at a depreciated value – at farmland
prices - to developers who then sold the same plots to wealthy buyers at real estate
market prices. A similar phenomenon was shown by Visser (2004a, 2004b & 2006)
in South Africa as well as Hiernaux (2005) in Mexico, where escalated property
value in tourism developed areas have weakened ownership perspectives for young
locals or lower income groups.

In San Juan del Sur and Tola, some farmers sold their land, as they were enticed by
the prospect of sudden wealth to spend their money on consumer goods, hence
jeopardising their only means of existence in a short period of time. Others were
promised by real estate companies that they could live on their plot and continue
their farming activities. However, the promise was only applicable until the prop-
erty changed hands again. In the South African municipality of Clarens, Visser
(2006) observed that second home development resulted in “the maintenance of
race and class segregation”. As property development increased, so did local taxes
that covered public infrastructure investments, therefore forcing people out of their
homes to other peripheral areas. Fritz (1982) and Faulkenberry and her colleagues
(2000) have also shown that land owners are either tempted or constrained to sell
their land to developers, which results in many locals abandoning farming activi-
ties. Once the crop and grazing fields were turned into golf courses, local commu-
nities have become more dependent on imported food supply; hence more vulner-
able to political and economic changes.

Further issues related to land use and ownership have come to light in both mu-
nicipalities. First, it is worth mentioning that the evolution and the transformation
of the Nicaraguan legal framework over land ownership have been ambiguous
since 1979.

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Xavier Matteucci, Dagmar Lund-Durlacher, Matthias Beyer

Although property ownership is accounted for in the local land registry, in Tola,
conflicts arose when different owners claimed ownership over the same piece of
land. As a result, some cases were brought to court, which then fuelled some level
of distrust in the region affecting its image as a destination (La Prensa, May 18th
2006 and January 26th 2008 among others).

For example, in Las Salinas de Nahualapa, Tola, indigenous resident groups have
long occupied territories, which in many cases, have never been ruled under any
written form of contractual lease or ownership until recently. Furthermore, in Nica-
ragua, beaches are public areas by law, and indigenous people have tradition-ally
been accessing them for recreational or survival purposes. In Tola, the privati-
zation of public goods in the form of fenced residential enclaves, have excluded lo-
cal communities from their traditional resources and activities like fishing and sea-
shell collecting, which revealed a significant source of alienation. A report un-
covers that, as a result of the recent tourism development, only 9 out of the 54 km
of beaches in Tola can now be accessed by the local population (Rodriguez, 2007).
Pessoa Silva and Lisboa Nobre (2007) exemplified similar accessibility concerns
on the Brazilian coast of Rio Grande do Norte. Hosts find themselves increasingly
excluded, both socially and economically from tourists by the very nature of ur-
banization patterns. They also found that resentment rages when locals are dis-
placed from their land due to boosted property values.

In their study on the impact of tourism on South Carolina’s coast, Faulkenberry et

al. (2000) stressed that most retirees from corporate or government jobs in the
northern states seek the security of gated communities where they have comfortable
and safe access to the ocean. Although preventing public access with their own in-
ternal security systems, such complexes include public infrastructures and spaces
behind fences. Consequently, the holiday homeowner is generally non-supportive
of social improvements for outside communities.

In Tola, investors and local authorities advocate the positive effects of new residen-
tial developments on the host community. Employment opportunities and public in-
frastructures such as new schools, health centers, an extended network of electric
lines and a new road connecting Tola to the town of Rivas have been put forward
(La Prensa, February 28th 2005). It was calculated that, through the Municipal De-
velopment Plan (Plan de Desarrollo Municipal) set by the municipality of Tola,
from the 555 jobs created in 2006, 2,800 new jobs will be created by 2010
(Alcaldía de Tola, 2007).

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 The socio-economic and environmental impacts of second home tourism

However, recent developments have questioned those possible positive effects on

the local employment, as only limited number of low-income jobs was created dur-
ing the construction phase and beyond. If more locals can now stay in Tola and
work as construction workers, gardeners or security guards, many jobs are also
likely to be filled by migrants from other regions and neighbouring countries.

To cast doubt on the long-term employment advantage of the holiday home sector,
a comparison with the only All-inclusive resort of Nicaragua is made. The resort,
located in Montelimar, has 525 beds and covers an area of 12,000 sqm where 108
people are employed on a full-time basis. The resort spends 1.9 million US$ annu-
ally for operation in the national economy. Taking into account that, on average, a
holiday house occupies an area of about 500 sqm, it would take 24 houses to fill the
resort land area. To reach the same level of spending and employment, the owners
of each of these houses would need to hire permanently 4.5 people and spend about
217 US$ daily on goods and services in the local economy.

No matter how hazardous All-inclusive resorts might be to justify economic bene-

fits to local communities, this comparison shows that holiday home developments
score even worse. Although the seasonality pattern of second home tourists has not
yet been a major issue in San Juan del Sur and Tola, it has been identified as prob-
lematic in previous studies. Because many second home owners occupy their house
only during their vacation time, the demand for tourism services is only at a low
level and significant direct employment is only created on a short-term basis
(Vles, 2004; Mazón, 2007).

Faulkenberry et al. (2000) noted that, for minimum-wage jobs such as maids and
gardeners, possibilities for promotion and further education are almost non-
existent. On the other hand, second home tourists who stay for several months tend
to have more interactions with residents than conventional tourists and are likely to
provide source of income for local entrepreneurs. Low seasons might transform
lively centers into ghost towns, which would fail to justify of provision with public
infrastructure and services to the year-round resident community (Mazón, 2007).

In their study on rural communities in Scotland, Bevan and Rhodes (2005) pointed
out that some holiday homes that remain vacant throughout most of the year can re-
sult in the closure of shops and services due to a fall in demand. Another im-portant
economic aspect is that second home tourists have lower expenditure patterns than
conventional tourists. In Spain, while the average daily expenses of a European
tourist (staying in a hotel) amounts to EUR 93,4, the second home tourist staying in
a rented home only spends EUR 33,9 a day, and EUR 17,1 if he stays in his own
house (Mazón, 2007).

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Xavier Matteucci, Dagmar Lund-Durlacher, Matthias Beyer

Torres Bernier (2003) has observed that second home tourists also tend to adopt lo-
cal residential consumption habits, namely the use of a private car as well as a lim-
ited use of and expenditure on recreational activities such as tourist attractions and
restaurants. Therefore, on a daily basis, the conventional tourist seems to have a
much greater multiplier effect on the local economy.

The municipal income generated by residential tourism can be seen positively in

the short term, because most investments in real estate have a strong positive effect
on municipalities’ budgets. In Tola, in 2007, it was estimated that second home
tourism projects contributed to roughly 13% of the total municipal income (Bonilla
and Mordt, 2008). Visser (2004a) and Hiernaux (2005) commented that in the long
term, this situation might change radically because of seasonality-driven expenses
and necessary investments in the public infrastructure. In San Juan del Sur and
Tola, municipalities are already dealing with access to drinking water and road con-
struction issues.

In Nicaragua, foreign real estate developers benefit from generous incentives to in-
vest in large tourism projects. This is reflected through la Ley No. 360, which ex-
onerates investors from up to 90% of income and property taxes for a period of 10
years. In the Rivas region, 23 tourism related projects benefited from la Ley No.
360 (INTUR, 2006). One criticism about real estate businesses lies in their lack of
commitment to support by-services and infrastructures beneficial to resident com-
munities (Mazón, 2007). In our case study, two visible impacts generated by real
estate developers stand out. One is the wear and tear on roads that is caused by
heavy truck traffic involved in the construction process. The second relates to the
increasing burden of waste storage imposed upon the municipalities’ budget.

6 Environmental impacts
Besides the economic effects of second home tourism, there is a danger of serious
ecological impacts caused by fast and poorly planned holiday homes developments
and unregulated consumption of basic resources. Some well-documented detrimen-
tal effects of second home tourism are landscape degradation, reduction of local
biodiversity, increased erosion and desertification, contamination of ground water
and soils, the disappearance of green public spaces, increased burden of waste
treatment, as well as the negative image of badly integrated architecture within
natural settings (Gartner, 1987; Vera Rebollo, 1987; Mateu I Llado, 2003; Aledo
and Mazón, 2004; Mazón, 2007).

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 The socio-economic and environmental impacts of second home tourism

In Tola, mangrove swamps were destroyed, and erosion and deforestation is visible
in San Juan del Sur. Moreover, the use of natural resources such as wood, sand and
river gravel for the construction of tourist facilities has left some physical scars to
the local scenery. However, it is important to note that no other dramatic impacts
are yet visible, since most large-scale projects are still at a very early stage of de-
velopment.

Climatic indicators show that the current scarcity of ground water due to the dry
tropical climate of this coastal region, which is available for the local agriculture
and recreation usage, should become more critical in the future. During the dry sea-
son, from January to April, the municipality of San Juan del Sur has been facing se-
rious problems with its water supply, both in terms of quality (potable water) and
quantity. This shortage in water resources, evidenced by the quenching of ground-
water level, is already jeopardising several segments of community life, such as the
farming sector (La Prensa, May 12th 2007), as well as the growing demand for
tourism activities (La Prensa, October 30th 2007).

In rural and coastal areas, holiday homes exclusively obtain their water supply by
pumping from natural ground-water reserves. As the amount of precipitation be-
comes even more erratic in the dry season and the level of tourist activities in-
creases, possible conflicts between investors, second homeowners and indigenous
communities might become agitated. A crucial aspect under scrutiny is the daily
water consumption pattern of both types of holidaymakers. According to the WWF
(2004) and the European Environment Agency (2000), the daily water consumption
of a conventional tourist who stays in a hotel is between 250 and 300 litres,
whereas the owner of a holiday home with swimming pool and garden consumes
between 500 and 600 litres a day. These figures clearly show the environmental
risk associated with uncontrolled holiday home development.

A further concern is in the disposal of waste and wastewater in rural and coastal ar-
eas where sewage systems are non-existent. Residential homes would usually have
their own soakage pits into which wastewater is discharged. However, due to the
lack of regulations and public waste management and assessment systems, the en-
vironmental impact of private soakage pits remains uncertain. Uncontrolled waste
management is likely to increase ground-water contamination, which, in turn,
would affect the potable water supply. Figures reveal that about 50% of Nicara-
guans livings in rural areas do not have access to a reliable source of water and that
25% do not have basic sanitation (Fise, 2004). Finally, it can be observed that an
obvious lack of architectural harmony is detrimentally impacting the natural attrac-
tions of coastal areas in both municipalities.

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Xavier Matteucci, Dagmar Lund-Durlacher, Matthias Beyer

7 Conclusions
This case study contributes some more light upon the very nature of second home
tourism activities. Due to the development and consumption patterns of the holiday
home sector – which mainly involve the urbanisation, construction and sale of
houses – it may be assumed that these activities should not be accounted for as
tourism activities.

It is argued that real estate developers not only aim at maximising short-term prof-
its, but also show little interest in developing tourist activities as well as sustaining
local communities in the long run. In addition, the fact that foreigners are involved
in the purchase of holiday homes does not justify any tourism activity. Conse-
quently, the holiday home sector would be better defined as a real estate activity,
and the ambiguous term residential tourism should therefore be avoided for needs
of clarity.

This investigation demonstrates the risks associated with the disorganised and un-
regulated development of second homes in developing economies. On the South
Pacific Coast of Nicaragua, the professed economic benefit of holiday homes is far
from being established, and at this stage of development, some detrimental effects
are already observable. Thus, the contribution of the holiday home sector to sus-
tainable development in peripheral areas is questionable.

Thus far, the local authorities have failed to limit negative effects because of an ob-
vious lack of budget, experience in the second home segment, an adequate legal
framework and clear policies. At the time of this study, no rules were determined
on land use and its carrying capacity or ensured appropriate control mechanisms
with fines to enforce regulations.

No feasibility studies were carried out and no codes of practice or plans guided and
monitored regional developments. Since there is potential for severe future impacts
to occur in the host of this study, additional precautions and corrective political ac-
tions would be necessary. In this respect, a stronger focus on sustainable strategies
would help develop and enhance diversified tourist products of high quality, as well
as ensure an equitable distribution of financial benefits throughout the entire supply
chain.

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 The socio-economic and environmental impacts of second home tourism

Educational programs and financial incentives for small, local and medium-sized
businesses for entering tourism and diversifying niche products should also be con-
sidered. Community participation, as well as public-private partnerships, would
help sustain local development and raise the quality of life. Finally, the great poten-
tial of other forms of tourism (ecotourism, rural tourism, cultural tourism etc.)
should not be neglected.

In this regard, the greatest danger of second home development lies in the overuse
of land and resources that could be used otherwise to develop other and more sus-
tainable forms of tourism activities.

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Xavier Matteucci, Dagmar Lund-Durlacher, Matthias Beyer

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 Section 4:
Optimizing Destination Capacity
through Real Estate Management
Strategies

163
 A conceptual design of public measures:
The case of the Flemish holiday property market

Mia Lammens, Raf De Bruyn & Frank Go

Abstract
Over the last years, the Flemish Coast has seen a steady increase in the number of
holiday homes. Simultaneously, the number of campgrounds and hotels is decreas-
ing. These trends are caused by the rigidity with which these types of accommoda-
tion are innovating and by the strong pressure from the real estate sector on hotels
and campgrounds. This paper presents a strategy to tackle the declining stock of
hotels and campgrounds. In order to provide a stimulus to the quality and develop-
ment of the hotel and campground markets, a choice for a common policy is seen
as a necessary condition. The most important actions to support this strategy are the
deployment of a few large-scale hotel and campsite projects with a strong focus, the
initiation of multi-purpose projects and the introduction of more specific destina-
tion plans. These projects will only yield a positive outcome if they are preceded by
an open stakeholder dialogue. The combination of the various proposed actions
should lead to a differentiated supply of sufficiently qualitative hotels and camp-
grounds. The implementation of these actions is ultimately the most difficult task.
In this respect, the stakeholders, including the Tourist Office for Flanders, policy-
makers on various levels and the private sector, particularly hotel and campground
owners face a daunting challenge.

1 Introduction
At the Flemish Coast the number of holiday homes has been rising over the past
years. Simultaneously, the number of campgrounds and hotels is decreasing. This is
the result of the rigidity with which these types of accommodation are innovating
on the one hand, and the strong pressure from the real estate sector on hotels and
campgrounds, on the other.

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Mia Lammens, Raf De Bruyn, Frank Go

The Tourist Office for Flanders opines that a differentiated supply of sufficient
qualitative commercial accommodations (including hotels and campgrounds for
tourists1) at the coast. This is a precondition to offer a ’sea-resort’ experience, that
tourists perceive as easily accessible and value-for-money spent.

As the tourist market is increasingly fragmenting and characterized by individuali-

zation, it is consequently important to offer tourists a choice of accommodation fa-
cilities. However, this is getting increasingly problematic due to the declining stock
of hotels and campgrounds. In this context, and to help resolve this issue, two stud-
ies were undertaken that aimed to identify a possible strategy to counter, or at least
arrest, the current decline in hotels and campgrounds. The purpose of this article is
to discuss the most important levers identified in the two studies in question. They
could be applied to bring about an interdisciplinary thought and the interrelatedness
of the spatial and commercial dimension to stop the decline of independently
owned hotels and campgrounds.

1.1 Definition of the problem

A fundamental dilemma in the managing tourism in the Flemish coastal resorts,
that underlies many others and emerges in many practical guises, can be summa-
rized as a “corrosion of character”. This is due to the decline of privately and often
independently-owned and operated hotels and campgrounds that have the potential
to add “couleur locale”.

In particular, during recent years (2002–2006) the Flemish Region has experienced
a positive evolution in the number of hotels (+10.4%) and their capacity (+7.8%).
However, during the same period, the hotels at the coast have known a decline
(-13.2% of the number of hotels and -9.4% of their capacity). Campgrounds in the
Flemish Region have suffered a negative evolution between 2002 and 2006 (num-
ber: -4.6%; capacity: -4.8%). At the coast, the number of campgrounds and their
capacity have declined even more (number: -10.7%; capacity: -9.8%).

___________________
1
Campgrounds for tourists: a camping ground with a specific number of tourist pitches. Tourist
pitch: area or accommodation (holiday house), intended for short-term rental (<= 31 days)

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 A conceptual design of public measures: The case of the Flemish holiday property market

Hotels 2002 2003 2004 2005 2006

Flanders
number 1099 1118 1142 1157 1213
capacity (# beds) 59814 61968 62916 63621 64469
Coast
number 357 354 340 321 310
capacity (# beds) 18154 18103 17590 16989 16455

Campgrounds
Flanders
number 284 284 284 277 271
capacity (# persons) 256263 255406 255018 251291 243843
- tourist pitch 48421 45963 48120 46801 50157
- residential picth 207842 209443 206898 204490 193686
Coast
number 112 110 110 106 100
capacity (# persons) 119460 119371 119050 115051 107699
- tourist pitch 19404 18522 17818 16849 14827
- residential picth 100056 100849 101232 98202 92872

Table 1: Number and capacity of hotels and campgrounds (Flanders-coast)

Source: Bryon J. and L Geysen (1997)

Increased mobility, the rise of international tourism destinations and therefore the
increasing competition, together with the weather factor, all have contributed to a
decline in the economic performance of the Flemish coastal tourism sector. Yet, the
Flemish coast remains a popular holiday destination, especially for domestic holi-
days. Because of the decline of long holidays at the coast (the average length of
stay at the coast: 7.2 days in 1995, 6.4 days in 2000, 5.5 days in 2006) and the
strong seasonality, the profitability for most hotels and campgrounds at the coast
declined sharply. Together with investors losing interest in hotel and campground
properties, due to their dwindling return on investment, the opportunities to respond
to the fast-changing demands of the tourist grew more limited. Presently, many ho-
tels and campgrounds have reached the end of their product life cycle and need a
reorientation in time to ensure their business continuity.

1.1.1 Holiday homes

Holiday homes include facilities (either houses or apartments), that are typically
used by their owners or occupants for holiday and recreational purposes, but which
can also be made available to third parties, on a rental, exchange, cost sharing or
hospitality basis. Consequently, holiday homes are categorized as supplementary
accommodation, and thus distinct from hotel establishments (Go, 1988: p. 20).

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Mia Lammens, Raf De Bruyn, Frank Go

Because Flemish coastal resorts are squeezed in between sea and polders, tourism
development takes place within a spatially constrained area. A corollary is that
strong competition develops between the tourism sector and other sectors (nature,
residential habitation, etc.). Not only is there substantial rivalry between the differ-
ent sectors, but also between the various players in the tourism market. In particu-
lar, the wealthy real estate sector is in pursuit of purchasing as much land and
buildings as possible for conversion into holiday homes. Its deep pockets enable
high purchase prices that independent operators gladly accept, were it only for the
absence of a successor to take over the business. The most attractive locations (e.g.
those along dikes) yield especially high property values. Consequently, the number
of hotels and campgrounds continues to decline. Could this pattern in due course
lead to a “corrosion of atmosphere” which has been the main attraction of the Flem-
ish urbanised coastal strip in the past?

Undoubtedly, the holiday homes (including apartments) may generate substantial

income for the Flemish coast. Nevertheless, the Tourist Office for Flanders seeks to
retain a differentiated supply of sufficient qualitative coastal commercial accom-
modation (including hotels and campgrounds) to ensure that the Flemish urbanised
coastal strip maintain its attraction to future generations of holiday makers.

Besides the fact that the first introduction to a seaside resort is usually through a
commercial accommodation (mostly hotels), it should be added that the occupation
rate of holiday houses is usually low. This leads to an inefficient use of scarce
space and has an impact the atmosphere of coastal communities. Most of the holi-
day home owners are likely to eventually use their second home for only a few
weeks leaving it unoccupied for the remainder of the year. The owners are often
disinclined to put their holiday home on the rental market, due to the complications
this may evoke. Moreover, they do not need the income from rent as the increasing
value of their holiday house will provide an adequate return in the long run. From
an economic point of view, commercial tourism provides better returns because its
average spending is greater (part of the expenditure goes towards accommodation).

2 Case study method

We apply a single case study approach of the Tourist Office for Flanders and argue
that the supply of quality hotels and camping sites along the coast has demonstrated
a downward trend, which needs to be reversed to ensure the success of the Flanders
tourism sector in the mid- and long term. In this instance it is appropriate to apply
our investigation as an exploratory ’pilot case study’, as described by Yin (1994):
“The pilot case is [more] formative, assisting you to develop relevant lines of ques-
tions – possibly even producing some conceptual clarification for the research de-
sign [of the actual case study].”

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 A conceptual design of public measures: The case of the Flemish holiday property market

The strength of the case method is that it allows the pilot site to assume the role of a
’laboratory’ for the investigators to observe different phenomena from different an-
gles. Its weakness is that the entire nature of the case may shift, unbeknownst to the
researcher, during the course of study (Yin, 1994, p. 42).

The success of tourist destinations depends to a large extent on effective relation-

ships between regional and local authorities (public sector) and enterprises (private
sector), in particular small businesses. In practice, the coordination and control of
the daily ’holiday property’ rental in many European regions is typically handled
by a destination management organization (DMOs). However on the strategic level
of spatial planning, policy-making and preservation of heritage sites and buildings,
(many) more stakeholders tend to be involved in the decision making process.

3 Analysis
The Tourist Office for Flanders considers it important to tackle the challenge of the
declining stock of independently owned and operated hotels and campgrounds.

3.1 Goal
The goal of the present study is to identify a strategy designed to contribute to en-
hancing the return on investment of both the hotel and camping sector. In the con-
ceptual design of public measures that follows below, we analyse both types of ac-
commodation. Subsequently, we present possible spatial instruments that need to
be implemented so as to both counter the pressure from the real estate sector and
approach tourism development process from a destination community-centric per-
spective (Murphy, 1985).

3.1.1 Market Analysis

The two studies, referred to earlier, identified the most important market character-
istics of the hotel and campground sectors at the Flemish coast. Its main dimen-
sions, supply-related features and demand-related features are discussed below.

Supply-related features:
– Both the hotels and the campgrounds are usually small-scaled family
businesses (hotel: an average of 23 rooms per hotel; campground: an average of
267 places per campground); most hotels have less than 50 rooms;
approxi-mately half of the campgrounds have less than 200 sites.
– The segment of 4-star and 5-star hotels at the coast is underrepresented (most of
the hotels are within the 0-star to 2-star segment; only 10% are within the 4-star
segment and there are no 5-star hotels).

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Mia Lammens, Raf De Bruyn, Frank Go

– There is a very unilaterally supply of campgrounds: the camping product is

strongly focused on residential places (campgrounds may have both tourism2
and/or residential3 lots); a large number of campgrounds offer only one tourist
pitch (because this is required by law) and only 16 campgrounds offer more
than 50 tourist places.
– The supply of conference and meeting facilities, special venues and (to a lesser
extent) conference hotels is small.
– Facilities and infrastructure are out-of-date. Most of the hotels and camping
sites invest just enough to provide a basic standard of quality. On camp-
grounds, the density of lots (average gross area per site: 146 sqm, whereas in
’Zeeland’ the standard is more than 300 sqm), is much too high by modern
standards and they have a poor landscape design. The result is that the
price/quality equations and the comfort offered are very low.
– There is a lack of knowledge about modern, professional marketing methods
and automation (for example in marketing and reservation booking systems);
– The opportunities for new hotel or campground developments are limited
because of the large investment required as a result of the high cost of land.

Demand-related features:
– Overnight stays are largely for recreational purposes (hotels: 91% recreational
overnight stays; campgrounds: approximately 100% recreational overnight
stays)
– There is a low number of overnight stays in the context of MICE (hotels: only
2%; campgrounds: negligible).
– Tourism is greatly depending on the season and as a consequence the
occupancy rates are low (occupancy rate hotels: 45-55). The largest number of
overnight stays occurs in the summer months and on weekends (60% of
overnight stays occurs from June to September) (Toerisme Vlaanderen, 2007).
– Tourism is weather-depending: bad weather during the summer months means
an immediate drop in occupation rates. Because of the small scale of the hotels
and campgrounds, it is usually not possible to offer all-weather infrastructure
such as wellness facilities, a swimming pool, etc.
– Most hotel customers at the coast are over 55 years old (53% are older than 55);
for campsites, companies with children are an important target group (51%
come with children) (Toerisme Vlaanderen: 2007).

___________________
2
Tourist lot: pitch intended for short-term rental (<= 31 days)
3
Residential lot: pitch intended for long-term rental (>= 31 days). These sites are usually
rented on an annual basis (or longer), as a result of which they can also be regarded as a sort
of holiday house.

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 A conceptual design of public measures: The case of the Flemish holiday property market

As the above features show, the profitability of hotels and campgrounds on the
Flemish coast is rather disappointing. This is caused, partly, by low occupancy
rates and strong seasonality, which makes professional management impossible and
sets in motion a vicious cycle. More specifically, a lack of income restricts invest-
ments to adapt the property to customer demands (including the desire for more
space, more luxury, more all-weather infrastructure, etc.).

Furthermore, to automate and upgrade the knowledge needed to exercise modern,

professional marketing methods. Finally, small hotels and campgrounds are typi-
cally no take-over targets for international chains.

4 Policy formulation
The choice for a common policy is viewed as the key to both mitigate the effects of
seasonality and modernise hotel and campgrounds stock, and, by extension, to in-
crease the return on investment of hotels and campgrounds in the Flemish coastal
zone.

In order to provide a stimulus to the quality and development of the hotel and
campground markets, a clear focus on policy has to be decided on. For the Flemish
coastal hotels, the focus must be on stimulating and developing conference and
wellness infrastructure. For campgrounds, the focus must be on stimulating and de-
veloping all-weather infrastructure for families with children and elderly people. It
is important that the chosen levers are incorporated in the policies of all coastal
municipalities, as well as on the provincial and Flemish policy-making levels.

The previous section underscored the need of coastal municipal councils, the pro-
vincial and Flemish policy-making levels to pursue a common policy. The follow-
ing section outlines how a strategy and agreements may be incorporated in a com-
mon policy document, including a financial-economic and a spatial dimension.

4.1 Financial-economic dimension

This chapter focuses on three aspects which form part of the financial-economic
dimension: scale economies, multi-purpose projects and economic stimuli, support
and advice.

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Mia Lammens, Raf De Bruyn, Frank Go

4.1.1 Scale economies

Hotels
In neighbouring countries such as the Netherlands and Germany, it has been shown
that investment in a few large-scale hotels can have a positive impact on the tour-
ism in a certain area, provided a clear focus is opted for. In addition, they will often
give an impulse to existing, smaller accommodation facilities, to also invest and
renovate. For example at the German Baltic coast in the 1990’s, a large investment
was, with government assistance, made in wellness hotels, which has led to strong
growth in the tourism market. At the Dutch North Sea coast, investments in a few
large conference hotels have led to a boost for the entire hotel market in the sur-
rounding area.

The completion of a number of large hotel projects on the Flemish coast can there-
fore lead to a boost for both an existing and a potentially new market for hotels.
Currently, the seniors market is a dominant feature of coastal hotels, and so is the
absence of the meeting, incentive, conference and exhibition (MICE) market seg-
ment. The development of an infrastructure to cater to wellness and MICE needs,
respectively, may help to rejuvenate Flemish coastal tourism.

Given the existing market for hotels and the already ongoing developments, and
based on the aforementioned analysis, we recommend developing a number of ho-
tel projects in the coastal cities of Ostend and Knokke-Heist. In the nearby future,
Knokke-Heist plans to construct a cluster around MICE (where among others a
luxury conference hotel will be combined with a casino and connected to a golf
course). In Ostend, there appears to be room for one or more large-scale hotels,
complementing the existing ’Thermae Palace’ hotel to be extended by 1,200 sqm of
wellness facilities.

The potential realisation of these projects in Ostend and Knokke-Heist is expected,

to bring about increased demand for quality hotels in these cities and their sur-
rounding area. Furthermore, it will be a stimulus for the existing hotels to com-
mence their renovation and expansion plans, with the important aim to improve
their quality. This may result in the creation of a few hotels, upgrading to a 4-star
status. Finally, the hotels may also be encouraged to connect their product and
marketing to the wellness and conference market.

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 A conceptual design of public measures: The case of the Flemish holiday property market

Campgrounds
In the Netherlands, the camping sector has increasingly focused on offering all-
weather infrastructure (sport and games, activities, water sport facilities, etc.), in
addition to offering high quality. In order to make these investments, which are not
providing an immediate return, increased turnover is needed. It can be achieved
primarily through expanding capacity, i.e. the number of sites. In turn, it requires
initiatives by enterprises that are both large and bold enough to incur the necessary
investment. However, it also forces many of the medium-sized businesses to invest
in scale-economies and costly facilities, resulting in most cases, in success.

Given that space on the Flemish coast is limited; such investments cannot immedi-
ately be combined with an expansion of the campgrounds. Another way of creating
better added value is to use the existing land area more intensively. This increased
use can be achieved though different occupation, a significantly higher price level
and a higher level of spending. The latter, besides offering simple accommodation
facilities (tent, caravan, etc.), can only be brought about by offering more luxurious
and more comfortable tourist accommodation (holiday cottages, luxurious (perma-
nent) caravans, etc.).

As is the case for hotels, a number of larger, high-quality campgrounds with an ex-
tensive range of all-weather infrastructure could be built at the Flemish coast.
These campgrounds could give both the existing and the new camping market a
boost.

Seen that the campgrounds are practically only aimed at recreational holidays for
families with children and the elderly, the focus of these business must be primarily
on all-weather infrastructure and tourist accommodation for these target groups. It
is important that this infrastructure is also accessible to tourists from different
campgrounds.

To implement such large-scale campground projects, sufficient space is needed.

Since space at the coast is scarce, there are only a limited number of locations
where such a project can be realised. Only those locations where there is a cluster
of campgrounds today (e.g. Bredene and Middelkerke) qualifies. Besides external
investors, existing campgrounds can cooperate with each other to initiate such a
campground project.

This approach should generate a chain reaction, whereby the smaller businesses are
likely to invest also in both quality and additional all-weather infrastructure. Fur-
thermore, it should be possible for smaller campground owners to make use of the
large-scale all-weather infrastructure (situated in the surrounding area), especially
water sport facilities.

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Mia Lammens, Raf De Bruyn, Frank Go

This should also lead to a differentiation in the various campground businesses,

whereby the smaller businesses could impose more emphasis on other features (e.g.
quiet in green surroundings).

4.1.2 Multi-purpose projects

To improve the profitability of new hotels and campgrounds, it is also possible to
consider multi-purpose projects. In these projects, a hotel or campground develop-
ment is linked with other functions, whereby the lower returns associated with ho-
tels and campgrounds can be compensated for.

In Knokke (Flemish coast) this principle is already applied to retain the hotel func-
tion. In some new developments a hotel function is included:

– to realise the new casino, a hotel should be built besides to the casino,
conference infrastructure and dwellings.
– with the redevelopment of the site of the former hotel ’La Reserve’, a new hotel
complex with 109 rooms must be constructed in addition to a maximum of 150
apartments.

A similar approach can also be used for campgrounds. For example, when convert-
ing a campground to a holiday park for second homes, it could be stipulated that:
– a minimum number of holiday homes must be placed on the tourist market
(for short-term hire);
– a minimum number of tourist sites must remain available.

When projects are considered that include a combination of apartment/hotel or

holiday cottages/campground, an effort should be made to bring the individual
holiday homes on the tourist rental market. In the Netherlands, the government
sometimes stipulates this (by a private judicial agreement between the administrator
and the owner) as a condition for campground operators to be allowed to expand. In
this way, they want to create greater vitality in areas that consist essentially of holi-
day houses.

The mixed strategic projects are projects in which areas should be (re)developed
under the direction of the government, in close cooperation with community repre-
sentatives and the private sector (=open stakeholder dialogue). In strategic projects,
the permission (or prohibition) of developments is not the main thing, but rather the
partnership principle whereby the different partners embark a common view.
Thereby, the tourism development process ceases to be largely controlled by public
sector goals in favour of a partnership-based approach designed to drive the coop-
erative process between public, private and commercial partners.

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 A conceptual design of public measures: The case of the Flemish holiday property market

Such a process is necessary to arrive at the successful design and (construction) re-
alisation of almost any project.

4.1.3 Economic stimuli, support and advise

It is important that the supply of small-scale hotels and campgrounds continues to
exist, in addition to adding hotels and campground projects. In view of the low re-
turns of existing businesses there is a need for economic stimuli, support and ad-
vice.

Training courses
The product analysis of the Tourist Office for Flanders has shown that many of the
hotels and campgrounds are family businesses, allowing only a small share of them
working with professional managers. A lot of operators therefore lack the knowl-
edge, skills and technical opportunities in the area of modern management and
marketing techniques. The government and the sector itself could play an active
role in updating the knowledge and skills in terms of management and marketing
through training courses.

Guidance and support for existing and new operators

Today, the Tourist Office for Flanders provides already financial support for hotels
and campgrounds. These subsidies are primarily focused on accessibility, sustain-
ability, etc. As an extension of the recommended focus on the conference and well-
ness markets for hotels and all-weather infrastructure (sport, games, activities and
activity programs, water sport facilities, etc.) for campgrounds, the small-scale ho-
tels and campsites can also be encouraged to invest in this area. In addition, there
may also be subsidies for improving quality. Furthermore, the government and the
sector could provide better support to hotel and campground owners with their ap-
plications for finance and subsidies.

Guarantee fund for bank loans

For banks, the hotel and campground market is small and relatively unknown.
Banks are quite anxious when it comes to financing this sector. As a result, banks
set strict requirements regarding loan guarantees and the justification of plans, and
charge a relatively high interest rate. A guarantee fund would reduce the risks for
the bank sector, which will facilitate the necessary finance for the hotel and camp-
ground sector. When such a guarantee fund becomes part of common policy, it is a
clear supporting signal to the banks.

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Mia Lammens, Raf De Bruyn, Frank Go

4.2 Spatial dimension

In addition to a strategy for finding a way to increase profitability of hotels and
campgrounds, we also investigated whether destination plans could be used to pro-
tect hotels and campgrounds at the coast. The following section presents the con-
ceptual design that serves as a framework for the existing spatial instruments that
can be applied to counter the real estate market pressure.

In Flanders, spatial policy is organised in accordance with the principles of struc-

ture planning. To this end, the various authority levels (regions, provinces and mu-
nicipalities) prepare a spatial plan. A spatial structure plan is a policy document that
reflects the long-term vision regarding spatial development in the area in question.
To crystallise (materialise) this spatial vision, a number of instruments are avail-
able. One of these instruments is the destination plan.

According to the current destination plan (already old), most of the hotels at the
coast are situated in the destination ’residential area’. This is because most hotels
are integrated into the urban structure. Residential areas are reserved for living, as
well as commerce, services, (non-intrusive) crafts company and small business,
green areas, socio-cultural institutions, public utility facilities, tourist facilities and
farms. Most campgrounds are located in the destination ’areas for recreation and
tourism’. These areas are intended for recreational and tourist accommodation as
well as overnight accommodation, including campgrounds, holiday parks, camping
and caravan parks and holiday parks for second homes.

The abovementioned destinations enable hotels and campgrounds to simply be

converted into a zone for the development of holiday homes (including apart-
ments). These destinations can, by creating a new destination plan, be further nar-
rowed or amended.

4.2.1 Hotel and camping areas

Using new destination plans, specific zones could be captured for existing (or new)
hotels and campgrounds. This would stop hotels from being converted into apart-
ments, or campgrounds from being converted into parks for holiday homes. This is
of course a very protectionist stance, which will not provide an impetus to stimulate
investment in existing hotels and campgrounds. For existing hotels and camp-
grounds, this will also lead to very strong protests from current owners (they will
see the opportunity to sell disappear). When designating ’hotel or camping areas’
for new hotels and campgrounds, there is a substantial risk that these areas will
never be developed. Therefore, this track is not considered to be a solution.

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 A conceptual design of public measures: The case of the Flemish holiday property market

4.2.2 Mixed zones with more generous regulations for hotels and campgrounds
Another solution is the zoning of areas in which a policy is applied that is sympa-
thetic to hotel or campground development. For hotels, this might mean that, in
case of a hotel development, a more generous floor index is permitted. Alterna-
tively, hotels might be offered more possibilities to expand. The same could occur
for campgrounds in ’areas for recreation and tourism’.

4.2.3 Multi-purpose projects

Linking profitable and less profitable functions (in the context of multi-purpose
projects referred to above) should also be translated into a development plan. These
plans will only result in a good outcome if they are preceded by an open stake-
holder dialogue.

5 Concluding remarks
The combination of the various proposed actions should lead to a differentiated
supply of sufficiently qualitative hotels and campgrounds. The implementation of
these actions is ultimately the most difficult task and has to be spread in a long-
term plan. In this respect, The Tourist Office for Flanders as well as the other pol-
icy-making levels and the hotel and campsite sector are facing a very big challenge.
To meet this challenge, a common policy as well as a good collaboration between
the different partners is indispensable.

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Mia Lammens, Raf De Bruyn, Frank Go

Bibliography
Bryon J. and L. Geysen (1997), Te gast in Vlaanderen – logiesaanbod 2002-2006, Steunpunt
buitenlands beleid, toerisme en recreatie: Leuven.
Go, F. M. (1988). Holiday Homes in Europe, Travel and Tourism Analyst, London Economist
Intelligence Unity, No. 3: 20–33.
Hortwath HTL (2008), Studie terugloop hotelfunctie Vlaamse Kust, Hilversum.
KCM/Kappelhoff Consultancy & Management B.V. (2007), Analyse en aanbevelingen voor de
kampeersector aan de kust, Breda.
Murphy, P. E. (1985). Tourism: A Community Approach, New York: Methuen.
Planning & Onderzoek (2007), De Vlaanderen-vakantieganger, Toerisme Vlaanderen: Brussels.
Planning & Onderzoek (2007), Toerisme in cijfers, Toerisme Vlaanderen: Brussel.
WES Onderzoek & Advies (2007), Ruime voor Toerisme en Recreatie in Vlaanderen, Brugge.
Yin, R. K. (1994). Case Study Research Design and Methods, Second Edition, Thousand Oaks:
Sage.

178
 Second homes and sustainable development –
A perception analysis of second homes in
Kitzbühel, Austria

Anita Zehrer, Hubert Siller & Marc Stickdorn

Abstract
The holiday property market has seen a genuine boom in the last years with second
homes being an integral part of today’s tourism and mobility and an important pil-
lar in the accommodation sector. Today second homes are seen as an enabler for
destination development and repositioning, yet also show serious concerns with re-
gard to the consequences they might have in terms of sustainability. Therefore, lit-
erature is often discussing if second homes are curse or blessing for tourism desti-
nations. The paper reports a case study on the socio-economic impacts of second
homes in the destination of Kitzbühel, Austria.

Keywords: Tourism, second home, sustainable development, perception analysis

1 Introduction
Second homes are not an issue of the past – they are an important element of con-
temporary lifestyles, mobility and tourism. Since the 1990s the growing interest in
second home tourism has been shared across social sciences (Müller and Hall
2004) and the demand for second homes has increased significantly during the
1990s (Müller 1999, Kaltenborn 1998, Buller and Hoggert 1994). “Numbers of
second homes increased rapidly in the twentieth century, especially in North Amer-
ica where rural scenic land was cheap and available” (Butler 2000, p. 523). Second
homes are an expression of elitism, exclusion and a more authentic holiday experi-
ence. Although second homes are seen as an enabler for destination development
and repositioning, this issue also shows serious concerns of sustainability and the
big issue therefore is if second homes are curse or blessing for tourism destinations.
The paper reports an online survey on the socio-economic impacts of second homes
among service providers of the destination of Kitzbühel, Austria. The research
question posed is: which socio-economic impacts do second homes have for service
providers in Kitzbühel?

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Anita Zehrer, Hubert Siller, Marc Stickdorn

Results show how service providers of Kitzbühel cope with the growing challenge
of second home properties within their destination development.

2 Second home tourism

There is a great variety of definitions for second homes, such as vacation homes,
holiday properties, summer houses, cottages, recreational homes or weekend
houses (Hall and Müller 2004). The origin of the term ’second home’ dates back to
ancient societies referring to the house on the countryside (Coppock 1977). Mainly,
second homes have become popular destinations for seasonal retirement migration
(Williams et al. 2000). Hall and Müller (2004) define the following characteristics
of second homes.

Second home characteristics

type structure buildings/vehicles

non-mobile houses and apartments solitary cottages and houses
second home villages
apartment buildings
semi-mobile camping mobile homes
recreational vehicles
tents
caravans
mobile boats sailing boats

Table 1: Second home characteristics (Hall and Müller 2004)

“In many areas of the world, second homes are the destination of a substantial pro-
portion of domestic and international travellers, while the number of available bed
nights in a second home often rivals or even exceeds that available in the formal
accommodation sector” (Hall and Müller 2004, p. 3). The integration of second
home owners into the local community of the destination depends on the ambitions
and attitudes of both owners and residents. “Clearly, where demand is focussed on
types of property that bring second home owners into direct competition with local
people, tensions may arise” (Gallent et al. 2005, p. 25). While for many destina-
tions, second homes are a major contributor to the regional economy, they often re-
sult in negative effects among residents and tourists alike.

Basically, definitions of second homes vary depending on the focus of interest (des-
tination and tourism management, city and regional planning, or sociology), yet no
generally accepted definition exists. However, figure 1 illustrates a categorisation
of second homes leading to a useful definition, on which the paper is based upon.
Authors therefore define second homes as temporarily inhabited individual holiday
homes of persons with or without local municipality registration (Plaz and Hanser
2006).

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 Second homes and sustainable development

Main Homes (permenantly inhabited) Second Homes (temporarily inhabited)

Permanently rented Personal used homes Commercially Individual holiday Individual holiday

homes to persons of persons with managed holiday homes of persons homes of persons

with local local municipality homes and resorts without local with local

municipality registration municipality municipality

Used definitions of second homes

Figure 1: Classification of second homes (Plaz and Hanser 2006, p.5)

3 Sustainable tourism
Tourism is an industry that involves several decision-makers in delivering the holi-
day product. Tourism development planning especially requires careful coordina-
tion and cooperation of all tourism decision-makers (Font and Ahjem 1999). In this
regard, the concept of sustainable tourism development has received considerable
attention in the last years (Butler 2000, Hall and Lew 1998, Stabler 1997). The ex-
pression ’sustainability’ has been traditionally used as synonymous with words
such as long-term, durable, sound or systematic. In short, sustainable tourism is
considered a potential means of achieving sustainable development; it is concerned
with impacts and effects of tourism development. The most widely used definition
of sustainable development derives from the Brundtland-Comission that defines
sustainable development as development that “meets the needs of the present with-
out compromising the ability of future generations to meet their own needs”
(United Nations 1987, online). Constitutive criteria for sustainable development
can be conceptionalised by the three dimensions of environmental, economic and
socio-political sustainability (Baumgartner 2005).

Generally, it can be said that second home properties do have impacts on

– the environmental amenity of a destination, as they are often purpose built and
not integrated into the overall picture of the destination planning;
– the economic development of a destination by providing temporary or
permanent employment, or by additional spending in local shops or facilities;
and
– the local residents due to the ’absentee’ ownership or temporary use of the
majority of second holiday homes.

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Anita Zehrer, Hubert Siller, Marc Stickdorn

The extent to which the three sustainability factors are considered sustainable de-
pends on the time dimension of the model. “The sustainability of any activity is to-
day judged in terms of its social, economic and environmental consequences: sec-
ond home purchasing and subsequent use is no exception” (Gallent et al. 2005,
p.35). Yet, it is extremely difficult to quantify the impacts of second homes. Fact is
that the concentration of second homes in well-settled destinations leads to both,
negative and positive effects among the destination.

Recently, various concepts and approaches emerge regarding a sustainable devel-

opment in tourism, e.g. benchmarking of sustainable tourism (Baumgartner 2005)
or CSR reporting in tourism (KATE et al. 2008). Furthermore, few works also fo-
cus on local or regional case studies on sustainable development of second homes,
e.g. second home tourism and sustainable development in North European periph-
eries (Müller 2000). By comparing relevant literature regarding second homes, dis-
crepancies between different regions become evident. Second home tourism is an
opportunity especially for regions with few experiences in tourism, e.g. Norway
(Flognfeldt 2003). However, the opposed situation appears in regions with long ex-
periences in tourism and high tourism dependency, e.g. Switzerland (Stettler 2007).
While in the first situation second home tourism is generally accepted as a form of
profitable tourism, it is rather considered as a threat for the well established local
tourism industry in the latter. Yet, the perception of second homes appears to shift
according to different stages of tourism development.

4 Case study
The paper reports an online survey on the socio-economic impacts of second homes
among service providers of the destination of Kitzbühel, Austria. The main re-
search question posed is: which socio-economic impacts do second homes have for
service providers in Kitzbühel? Single case study research methodology was cho-
sen to achieve a multi-faceted description of relationships, due to the exploratory
facet associated with the subject, so as to reveal relevant and updated information.
In order to gather relevant input, a standardized online questionnaire was sent to
100 service providers of Kitzbühel in April 2008 via the local tourism association
(Kitzbühel Tourismus). The survey design allows investigating the perceived im-
pact of second homes on the destination of Kitzbühel. The survey contains two
overall items regarding the importance of second homes and sustainable develop-
ment and then splits sustainable development into the three sustainability dimen-
sions derived from literature. Each of these three dimensions then is interrogated in
more detail by five positively and five negatively associated items. Furthermore,
the perception of second home owners by service providers is surveyed with a se-
mantic differential, using both positive and negative adverbs.

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 Second homes and sustainable development

The last part of the questionnaire focuses on socio-demographic data, such as na-
tionality, resident status, tourism dependency or personal relation to local second
home owners.

4.1 The destination of Kitzbühel

Kitzbühel is situated in the touristic region of the Tirol, Austria, with 61,456 regis-
tered inhabitants in 2006, including 20,874 second home residents, resulting into
Tirol’s highest second home quote of 34% of all registered residents. In the federal
state of Tirol, 96,434 out of 700,427 inhabitants are second home residents, which
equal a total second home quote of 13.8%. Whereas in total numbers, the regional
capital Innsbruck (24.9%) outruns Kitzbühel (21.6%) in terms of registered second
home residents due to the universities located in Innsbruck, Kitzbühel is by far the
area being influenced most by second homes. In the Tirol, registered second homes
have continually been increasing since 2002 up to a number of 96,434 registered
second home residents (+2.9% in 2006). Since 2004 this figure is dominated by an
increasing number of foreigners (+5.8%) compared to Austrians (+0.7%). In Kitz-
bühel, the same trend becomes apparent, however, on a lower level (total increase
of second homes: 0.5%, foreigners: +0.8%, Austrians: -0.2%). In the Tirol, 53.7%
of all second home residents are Austrians, followed by Germans (27.6%), Italians
(4.5%) and others, while Kitzbühel has only 33.7% second home residents with
Austrian nationality and a majority (50.3%) of second home residents with German
nationality (BEV 2006). These figures prove the tremendous importance of second
homes for the area of Kitzbühel in comparison to the greater region of the Tirol.
Therefore, the paper focuses on Kitzbühel as a case study to investigate whether
Kitzbühel’s service providers appraise second homes as positive or negative for the
destination’s sustainable development.

4.2 Study results

Out of the 100 service providers who received the questionnaire, 74 took part and
61 completed the survey, resulting in a response rate of 61%. All respondents are
Austrian and 93.4% of them are living or working in Kitzbühel. 96.7% are em-
ployed, most of them in the tourism service sector (24.6%), followed by other local
service providers (21.3%), hotel sector (13.1%), public sector (9.8%) and others,
i.e. construction businesses, other local industries, gastronomy, estate agents, tax
counsellors, etc. Almost all of them work in small and medium-sized businesses
(67.1%). Only 11.5% are self-employed and 14.6% work in larger businesses with
more than 100 employees. Indicatively 55.8% claim to be dependent on tourism,
25% to be more or less tourism dependent, only 18.3% answered to work in a busi-
ness which is not or not so much depending on tourism.

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Anita Zehrer, Hubert Siller, Marc Stickdorn

The vast majority of respondents (83.6%) do not personally know or just very few
second home owners in their region, only 9.8% do know some and 6.5% answered
to know many. This socio-demographic background data is important for the fol-
lowing interpretation of results, since it reveals a broad and characteristic mix of re-
spondents for a traditional tourism destination like Kitzbühel. The vertical black
line symbolises each item’s mean, while the horizontal grey one represents the
standard deviation. Hence, the shorter the grey line is, the stronger is the item’s
relevance.

important neutral unimportant

1 2 3 4 5

Overall Second Homes 2,43

Overall Sustainable Development 1,41

Overall Social Apsects 2,16

Overall Environmental Aspects 2,33

Overall Economic Aspects 1,89

Figure 2: Overall ratings and impacts of second homes in Kitzbühel

Figure 2 represents the survey’s main items (mean values). While second homes in
general are estimated to obtain the least important impact on the destination of
Kitzbühel (2.43), sustainable development is regarded to be of utmost importance
(1.41). Out of the three dimensions of sustainable development, the economic as-
pects are evaluated to have the most vital impact on the region (1.89), followed by
social (2.16) and environmental aspects (2.33). However, all of these items influ-
ence Kitzbühel to some extent, since none of them are even close to neutral (3).

4.2.1 Sustainable development

The findings regarding sustainable development are categorised by the three di-
mensions of social, environmental and economical aspects, illustrated in figures 3
to 5.

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 Second homes and sustainable development

Figure 3 presents the social aspects of the service providers’ assessment regarding
second homes in Kitzbühel. Apparently, second homes are not estimated to have
any positive impact on community’s social aspects (grey highlighted items, mean
3.74). Yet, second homes do have considerable negative impacts according to re-
spondents, as the negative items (dark grey highlighted) reveal a mean value of
1.85. The item “cold beds” attracts attention in this illustration as it is related to
have the highest (negative) impact on the destination (1.16) with a small standard
deviation of 0.45.

important neutral unimportant

1 2 3 4 5

Enhanced community lifestyle 3,66

Creation of social facilities 3,54

Increase in local pride 3,95

Preservation of a traditional way of life 3,89

Use of redundant housing stock 3,64

Increase in crime rate 2,46

Loss of cultural identity 1,93

"Cold Beds" - Empty properties in off-season 1,16

Insufficient housing stock 1,84

Change in social life 1,84

Figure 3: Perception of social aspects

185
Anita Zehrer, Hubert Siller, Marc Stickdorn

important neutral unimportant

1 2 3 4 5

Beautification of area 3,10

Opportunity to realise new projeckts 3,21

Protection of heritage buildings 3,87

Protection of natural areas 3,95

Creation of environmental facilities 3,95

Loss of visual amenity 2,25

Environmental degradation 2,44

Stress on road systems 1,59

Exploitation of natural areas 1,54

Overpopulation 2,95

Figure 4: Perception of environmental aspects

important neutral unimportant

1 2 3 4 5

Increase in employment opportunities 2,67

Creation of predictable economic base 2,72

Growth of construction industry 1,74

Growth of service industry 2,20

Increase in govermental revenues (tax) 2,36

Increase in property prices and rents 1,05

Increase in cost of local goods and services 1,46

Replacement of existing hotel industry 2,61

Low frequentation in off-season 1,70

Minor added value for local economy 2,26

Figure 5: Perception of economic aspects

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 Second homes and sustainable development

Figure 4 focuses on environmental aspects. Although results show the same ten-
dency as the previous chart, they are less distinctive, since the average of all posi-
tive items is slightly lower (3.62) compared to the negative ones which are slightly
higher (2.15). On the one hand, the two positive items “beautification of area” and
“opportunity to realise new projects” are not significant (3.10 and 3.21), so is the
negative item “overpopulation” (2.95). On the other hand, the two negative items
“stress on road systems” and “exploitation of natural areas” are significantly higher
(1.59 and 1.54) with a small standard deviation of 0.8 and 0.85.

In contrast to the results of the social and environmental aspects, economic aspects
are more diversified as figure 5 shows. Both positive and negative items are rated
to have impacts on the region, with positive items again less (2.34) than negative
ones (1.82). The item “increase in property prices and rents” with a mean of 1.05
and a standard deviation of only 0.22 shows the biggest impact on the destination.

4.2.2 Comparison of study results

To some extent the Kitzbühel survey design allows a comparison with a survey car-
ried out by Hall & Keen in New Zealand in 2001.

In this study councils were interviewed as they were seen to treat all components of
housing stock in the same way (Müller et al. 2006). Although not all items used in
the New Zealand survey have been included in the Kitzbühel study, the questions
which might be compared reveal interesting results, as figure 6 shows (Kitzbühel -
grey line and New Zealand - grey line).

While the items regarding positive social aspects do not differ significantly, those
referring to negative social aspects do tremendously. As pointed out earlier Kitz-
bühel’s service providers evaluate the negative social impact of second homes
mainly as important, while the New Zealand councils’ evaluate it as not important
(Kitzbühel mean 1.85 versus New Zealand mean 4.12). The same outcome, al-
though less significant, appears for environmental aspects. The four positive items
do not diverge considerably, but the four negative ones do (Kitzbühel mean 1.96
versus New Zealand mean 3.33). Though the positive economic aspects with a
mean of 2.33 in Kitzbühel versus 2.75 in New Zealand differ less than the negative
economic aspects with mean 1.26 in Kitbühel versus 3.74 in New Zealand, all eco-
nomic aspects vary significantly, particularly the negative ones.

187
Anita Zehrer, Hubert Siller, Marc Stickdorn

important neutral not important

1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5 5,0

Enhanced community lifestyle 3,50 3,66

Creation of social facilities 3,54 3,83

Increase in local pride 3,53 3,95

Social Aspects

Preservation of a traditional way of life 3,73 3,89

Use of redundant housing stock 3,64 3,92

Increase in crime rate 2,46 4,24

Loss of cultural identity 1,93 4,34

"Cold Beds" - Empty properties in off-
1,16 3,64
season
Insufficient housing stock 1,84 4,32

Change in social life 1,84 4,08

Beautification of area 3,10 3,85

Environmental Aspects

Protection of heritage buildings 3,73 3,87

Protection of natural areas 3,90 3,95

Creation of environmental facilities 3,50 3,95

Loss of visual amenity 2,25 3,29

Environmental degradation 2,44 3,15

Stress on road systems 1,59 3,55

Exploitation of natural areas 1,54 3,33

Increase in employment opportunities 2,67 3,38

Economic Aspects

Creation of predictable economic base 2,72 3,32

Growth of construction industry 1,74 3,74

Growth of service industry 2,20 3,58

Increase in property prices and rents 1,05 3,58

Increase in cost of local goods and
1,46 Kitzbühel New Zealand 3,90
services

Figure 6: Comparison of selected items of Kitzbühel and New Zealand

The findings of this comparison prove the discrepancies mentioned in literature.

The survey in New Zealand documents a neutral or even unimportant perception of
second home impacts on destinations. This may be due to insufficient importance
or lacking awareness of second home tourism in specific regions. Unfortunately,
there are no numbers available regarding second home quotes in New Zealand,
which would enable a more detailed analysis (Müller et al. 2006). However, the
findings in Kitzbühel contrast the New Zealand’s perception of regional second
home impacts in all three dimensions – overriding in the negative awareness in all
of them. This might be due to the strong impact of second homes in Kitzbühel.

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 Second homes and sustainable development

Interestingly, Kitzbühel’s service providers are highly sensitive towards second

homes, not only indicated by the high survey participation but also by the sophisti-
cated perception of second home owners. While they have none or negligible posi-
tive impacts on municipality’s social life and destination’s environmental aspects,
they do have extensive negative impacts according to respondents. However, the
economical value of second homes for the destination is largely recognised. Hence,
conflicts between relevant stakeholders might well arise, which is supported by the
social perception service providers have of second home owners.

4.2.3 Social Perception

Figure 7 shows the service providers’ perception of second home owners using a
semantic differential, which describes second home owners by opposing adverbs.

Figure 7: Social perception of second home owners

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Anita Zehrer, Hubert Siller, Marc Stickdorn

Although the results in general provide only few significant values, a tendency is
clearly observable. Second home owners are estimated to be old, interchangeable
and uninteresting, and are generally perceived as negative. The single positive item
associated with second home owners is “Profitable” which relates to the economic
aspects of second homes for the destination. This result shows a largely reserved
and restrained position and attitude of service providers of the destination towards
second home owners of Kitzbühel.

5 Conclusion
Second homes are a critical issue in today’s tourism market. On the one hand, sec-
ond homes are regarded as a curse when it comes to economic benefits for the des-
tination; on the other hand, it is seen as a blessing for residents and service provid-
ers of the holiday destination both in terms of society and environment. The paper
reports a quantitative study among service providers who are residents in Kitzbühel
on their positive and adverse attitudes towards second homes and its implications
for sustainable destination development with regard to society, economy and envi-
ronment. Results clearly show that second homes in general are estimated to obtain
the least important impact on Kitzbühel (mean 2.43), while sustainable develop-
ment is regarded to be of utmost importance (mean 1.41). Out of the three dimen-
sions of sustainable development, the economic aspects are evaluated to have the
most vital impact on the region (1.89), followed by social (2.16) and environmental
aspects (2.33). To sum up it can be stated that Kitzbühel’s service providers are
highly sensitive towards second homes and conflicts between relevant stakeholders
might well arise. Compared to the results of the New Zealand study where local
governments perceive second homes as both a curse and a blessing, the attitude of
Kitzbühel’s service providers is largely reserved and sceptical towards second
home owners.

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 Second homes and sustainable development

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Management, in Tourism, Mobility and Second Homes, Clevedon, UK.
Müller, D. K. and Hall, C. M. (2004). The future of second home tourism. In: Hall, C.M. and
Müller, D. K. (eds.), Tourism, mobility and second homes – between elite landscape and
common ground, pp. 273-278. UK: Channel View Publications.
Plaz, P. and Hanser, C. (2006). Neue Wege in der Zweitwohnungspolitik - Problemanalyse und
Diskussionsvorschlaege für eine wertschoepfungsorientierte Zweitwohnungspolitik in
Graubünden, 2. Ed., Wirtschaftsforum Graubuenden, Switzerland.
Stabler, M. (1997). Overview of the sustainable tourism debate. Wallingford: CABI.
Stettler. J. (2007). Zweitwohnungen und Tourismus – ein unloesbares Problem?, in 1. Happimag
Symposium, Kalte Betten sorgen für heisse Koepfe – Zweitwohnungsbau auf dem Pruefstand,
5. Dezember 2007, Hochschule Luzern, Switzerland.
United Nations (1987). Report of the World Commission on Environment and Development.
General Assembly Resolution 42/187, 11 December 1987, New York, USA. Available at
http://www.un-documents.net/a42r187.htm, retrieved April 28th, 2008.
Williams, A. M., King, R., Warnes, A. and Patterson, G. (2000). Tourism and international
retirement migration: new forms of an old relationship in southern Europe, Tourism
Geographies, 2, pp. 28–49.

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in a seaside destination

Serena Volo

Abstract
This research paper analyses and compares the demand and supply of real estate
properties and traditional lodging establishment in a seaside destination – Cefalù,
Italy – with the aim of exploring and contrasting the characteristics of real estate.
Secondary data from a structured questionnaire, and primary data from semi-
structured, face-to-face interviews conducted with key informants and an in-
vestigation of intermediaries’ website offering second houses rental constituted the
method of research for this paper. The findings should help tourism destinations to
(a) evaluate the impact of the new real estate development on residents, local tour-
ism entrepreneurs, and services and utilities providers, and
(b) understand the conditions necessary for effective capacity management and
thereby contribute to destinations’ endogenous growth and welfare.

Guidelines for further study and recommendations to local operators and managers
are provided.

Keywords: Tourism destination, second houses, research paper, Cefalù, Italy

1 Introduction
Real estate tourism demand, the demand for accommodations in single or limited-
unit, non-hotel, dwellings, has been growing in recent decades, and due to the in-
creased mobility of tourists and the relatively low price of real estate accommoda-
tions, the character of the demand has shifted. A more or less stable, regional and
seasonal migration has been replaced by a more international and flexible demand
pattern. In many regions around the world this form of tourism is thriving, assuring
exploitation of a large number of properties originally built as weekend retreats or
vacation homes. From nobility getaways to retiree dwellings, from beach houses to
alpine timeshare, from urban apartments to rural refuges, the motivations for own-
ership and the geographical location of these properties are characterized by attrib-
utes that make them suitable for the tourism industry.

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Though most researchers believe the impact of second-home tourism is largely

positive, its negative impact has also been highlighted, including environmental
drawbacks due to overcrowding of the destination during the tourist season, social
friction between “outsiders” and residents, and economic effects on the labour and
real estate markets (Hall and Müller, 2004a).

On the demand side of the real estate tourism market equation in the contemporary
market are the new ’want characteristics’ of the tourists. These appear to include a
uniqueness of the destination, which requires local planners and operators to rein-
terpret the experience of the destination and, working closely with local players, to
learn and apply new concepts in co-creating an experience that avoids non-
participatory, “staged experiences and encounters” in overcrowded settings. On the
supply side there are a variety of players, including the owners of individual prop-
erties rented during the tourist season, the management of large real estate proper-
ties specifically built for tourism, the players comprising the timeshare industry and
the various intermediaries that facilitate access to the market.

The variety in the supply side of the market could, if players cooperate strategically
among themselves, destination management organizations and local governments,
ensure that demand is satisfied and that the positive aspects of this form of tourism
will be enhanced, thus contributing to the socio-economic development of the
communities where these real estate properties are located. A challenge also re-
mains with the traditional tourism accommodation sector, especially in the ability
of small hotel operators to cope with the changing patterns of demand and to ra-
tionalize costs while maintaining good levels of occupancy.

In order to contribute to an understanding of the role, structure and development of

the destination real estate market and to provide some direction for marketing and
research initiatives on the phenomena of real estate tourism, this paper analyses,
compares, and contrasts the demand and supply of real estate properties and tradi-
tional lodging establishment in the seaside destination of Cefalù, Sicily. The re-
mainder of the paper is structured as follows:
(a) in the first section a review of the literature on the pattern of and issues sur-
rounding the phenomena of real estate tourism research is presented;
(b) the second section introduces the study area’s characteristics, presents opera-
tional definitions and describes the methodology of the paper;
(c) the third section analyzes the findings by examining the dynamics of the sea-
sonality and life cycles of demand and supply, the origin of the tourist flows
and the contrasting characteristics of real estate accommodations and those of
the traditional lodging establishments;

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(d) the fourth section discusses, in light of the study’s findings, the benefits of real
estate tourism, the obstacles to its development, and the marketing implica-
tions; and
(e) in the fifth and last section the study’s conclusions and limitations are pre-
sented and future research directions are suggested.

2 Real estate tourism: Patterns and issues

Patterns of tourism and leisure behaviour related to second homes have been stud-
ied in a comprehensive manner by the milestone work of Coppock and contributors
and presented in Second Homes: Curse or Blessing (1977) and also by Hall and
Müller and contributors in Tourism, Mobility and Second Homes: Between Elite
Landscape and Common Ground (2004b). Hall and Müller (2004a) used a defini-
tion of second homes that encompasses stationary, semi-mobile and mobile dwell-
ings, but the contributions in their edited book focus on privately owned, non-
mobile second homes located in rural and peri-urban areas. Indeed, substantial
work has been done on second homes’ contribution to rural and peripheral econo-
mies (e.g., Green et al., 1996; Deller et al., 1997; Flognfeldt, 2002), on their family
heritage role (e.g., McHugh et al, 1995; Kaltenborn, 1997; Williams and Kalten-
born, 1999), on their participation to the international retirement migration
(Casado-Diaz, Rodriguez, 2002; Williams and Hall, 2000), on their effect to the
housing market (Shucksmith, 1983) and the related issues of overdevelopment
(Mitchell, 1998; Selwood and Tonts, 2004), on their negative environmental impact
(Gartner, 1987; Suffron, 1998), on their cultural identity character and place affilia-
tion (e.g., Aronsson, 2004; Flognfeldt, 2004; Halseth, 2004), on their contribution
to seasonality issues (Müller, Hall and Keen, 2004; Frost, 2004) and their effect on
costal and islands tourism (Barke and France, 1988; Casado-Diaz 2004; Frost,
2004; Giambalvo and Parroco, 2004; Parroco and Vaccina, 2005; Tomaselli and
Vaccina, 2006; Volo, 2006). Müller and Hall (2004b) have concluded that second
homes are “more of a blessing than a curse for many regions”, but while the inter-
action between second home owners and communities create socio-economic bene-
fits that vary among regions, most governments seem to fail in understanding the
depth of the phenomena and many planning and management issues therefore re-
main unresolved.

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One of these unresolved issues is certainly that of the collection of reliable and use-
ful statistics on the inventory of second homes and their representation as financial
assets among the stock of properties in the real estate market. Statistics on the de-
mand and supply patterns of second homes within the tourism market will there-
fore necessarily be lacking. The lack of reliable statistics has been pointed out in
several international studies (Shucksmith, 1983; Barke, 1991; Müller and Hall,
2003; Casado-Diaz 2004; Müller, 2004) as well as several more narrowly focused
Italian studies (Giambalvo and Parroco, 2004; Parroco and Vaccina, 2005; Volo,
2006).

In an attempt to fill the gap in the Italian official statistics, several studies have es-
timated the number of tourists using second homes and the economic impact of
second homes in various regions of Italy (Macchiavelli and Guarini, 1994; Mac-
chiavelli, 1995; Becheri and Gambassi, 1998; Falorni, Becheri and Gambassi,
1998; Manente and Scaramuzzi, 1999; Bartolini, Becheri and Gambassi, 2001;
Cipollini, 2004; Giambalvo and Parroco, 2004; Parroco and Vaccina, 2005;
Tomaselli and Vaccina, 2006).

These studies focus on the issue of non-observed economy related to second

homes, also called hidden tourism, and they therefore distinguish among second
homes that are officially registered as tourism accommodations and those that are
not. Moreover, with few exceptions (e.g.: Parroco and Vaccina, 2005; Tomaselli
and Vaccina, 2006), these studies do not provide a comprehensive analysis of the
destination’s development. The rational for this study is premised on the fact that
tourists who use real estate properties as tourism accommodations behave the same
whether the second homes are registered with the competent authorities as tourism
accommodations or not. Therefore, in present research the characteristics of the real
estate tourism market are examined and compared with traditional lodging accom-
modations from more of a marketing prospective than from a statistical one.

3 Study area and methodology

The study area of focus is the town of Cefalù, a seaside destination within the prov-
ince of Palermo, located on the Tyrrhenian (northern) coast of Sicily, Italy. Cefalù
occupies about 66 sqkm which is 1.3% of the province area of Palermo. It has
13,774 inhabitants, which is 1.1% of the population of the province of Palermo.
During the summer season, the population of Cefalù undergoes a five to six fold in-
crease in population. Particularly charming, thanks to its geographical location as
well as its geological, historical and cultural attractions, Cefalu’ is a magnet for
numerous domestic and international tourists. Cefalù was selected as the focus of
the study for theoretical as well as practical reasons:

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(a) it unquestionably fits the definition of a tourism destination as defined by the

literature (e.g.: Murphy, Pritchard and Smith, 2000; Cho, 2000);
(b) there has been a high, and often unrestricted, process of urbanization with a
consequent tourist exploitation,
(c) it has exhibited a high concentration of tourists and tourism activity in time and
space and stimulating changes in the local economic structure;
(d) it represents a destination of manageable size and complexity for modelling
factors relevant to real estate development and its impact on tourism; and
(e) last but not least, the destination has been the subject of a national investigation
on the related topic of unreported tourism statistics to which the author had
contributed (Tomaselli and Vaccina, 2006).

This study will define:

(1) “real estate properties” as:
(a) attached multi-unit dwellings such as apartments and terraced houses
(b) semi-detached, single family homes such as duplex dwellings, and
(c) detached dwellings, such as villas and cottages;

(2) “Real estate accommodations” as: those real estate properties used by owners as
vacation houses, or rented to tourists and therefore representing a financial asset in
the tourism market. The style and characteristics of the supply of these real estate
accommodations in the tourism market vary according to the country and region of
the world. The Sicilian real estate tourism market is characterized by a Mediterra-
nean flavour and accounts mostly for seaside or near to the seaside dwellings and
homes.

The present study analyzes traditional lodging suppliers’ offerings through re-
gional official statistics. Available documentary information was collected to estab-
lish the geographical and historical context of the town. Annual time series data
(1972–2005) of arrivals and overnights stays were provided by the official tourist
board of Cefalù for both Italian and foreign tourists. Occupancy levels, seasonality
and the origin of tourist flows have been documented for the different types of
lodging establishments. Destination life cycle theory (Butler, 1980) was applied to
these data to evaluate if it could adequately describe and characterize the evolution
of this small successful tourism destination and, if so, to identify its current stage of
evolution as described by that model (Volo, 2003; De Cantis and Volo, 2006).
Semi-structured, face-to-face interviews were conducted, in the spring of 2003 and
2005, with key informants in a field investigation to complete the information nec-
essary to fully apply the destination life cycle model. The moving average (MA) for
arrivals and overnight stays were calculated with reference to the two broad classes
of market of origin, viz., Italian and international visitors.

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A moving average assumes that the peaks and the plateau occur in the same intra-
year periods, and after verifying this, a centred 13-months simple MA was calcu-
lated for each of the series.

The use of real estate accommodations in Italy generates two different markets:
(a) vacationers accommodated free of charges in their private second-homes or in
friends or relatives’ properties, and
(b) seasonal houses, apartments, villas or private rooms that are rented to vacation-
ers but of which only a few are registered as official tourism lodgings, and the
majority not officially registered in any tourism accommodations’ registers,
thus becoming an unofficial supply that is not reported in neither voluntary nor
obligatory statistical registers.

Consequently local or region tourism authorities as well as the national statistical

office have no means or opportunity to evaluate and register the demand it satisfies.

The characteristics of the demand, i.e., the characteristics of the tourists that use
this type of accommodations, are therefore neither recorded nor studied, although
the owners of such dwellings are often de facto tourism entrepreneurs, and they
represent the supply side of this market.

In order to identify the demand and supply characteristics of the tourism market
generated by the real estate properties in the Cefalù destination, this study used sev-
eral data sources: to analyse demand, secondary data obtained in the course of the
above referenced national investigation (Tomaselli and Vaccina, 2006), which in-
cluded a field research investigation conducted in the summer 2005 was used. This
investigation included a survey of 2,502 visitors, including tourists staying at tradi-
tional lodging establishment, tourists staying in real estate properties and same-day
visitors, and was conducted using a structured questionnaire (for details on sam-
pling method see Mendola, 2006).

To study the supply of these real estate accommodations, an investigation of inter-

mediaries’ web site offering of second-house rentals was conducted. It was neces-
sary to rely on both qualitative and quantitative sources of evidence. The use of
qualitative data was made necessary by the unavailability of quantitative data re-
lated to the real estate property rentals, as many of these rentals were non-
professional operations of limited size. Consequently, in order to strengthen the va-
lidity and reliability of the results, multiple sources of evidence were gathered, in-
cluding the testimony of key informants, and then integrated. These data gathering
procedures took place during the spring and summer 2005.

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An analysis of the secondary data was performed on 1,648 valid questionnaires that
were filtered from the original database. Of the initial 2,502 visitors surveyed, only
valid questionnaires were selected. Same-day visitors were also excluded, as they
were not of interest of the present study. For the aim of the present study, the 1,648
valid questionnaires were divided in to three groups according to the type of ac-
commodation used:
(1) hotel or hotel-type of accommodations;
(2) real estate properties used as tourism accommodations by owners, by friends
and relatives of owners and therefore free of charge, and by tourists at a given
price;
(3) other tourism accommodations such as camping, bed and breakfast, agro-
tourism, boats, and religious institutions.

Only the first two of these three groups were analysed and compared however, as
the last group was not a focus of the investigation. The comparisons of these two
groups were performed using SPSS. Demographics, purchasing behaviour, and ex-
penditure patterns were studied and compared to shed light on the characteristics of
real estate tourism in Cefalù.

An analysis of the online offering was conducted using the search engines
“Google” and “Yahoo”. The first 20 outputs of the entries “Cefalù vacation houses”
and “Cefalù holiday houses”, in Italian and in English were analyzed. The vari-
ables recorded from this web site offering included: the nature of the offer (i.e.,
bed, room, house, apartment, etc.), prices, and the flexibility of the offering (exam-
ple: handicap access, different methods of payment, possibility to accommodate
beyond the number of beds indicated in the advertising). Marketing mix informa-
tion of these accommodations was gathered in the field as well as with information
produced through the online search engines.

4 Finding and discussion

4.1 The evolution of the destination
An analysis directed at determining the time course of the Cefalù destination life
cycle up to the present consisted of establishing the chronology of relevant “desti-
nation life cycle development” and then mapping each into its correlated destina-
tion life cycle stage according to the “life-stage indicators” and their progression as
originally described by Butler (in Getz, 1992). Verification of the assignment of
events comprising the chronology to their matching life cycle stage was facilitated
by the application of operational definitions of the model’s stages as given by
Haywood in 1986 (in Toh, Khan and Koh, 2001).

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The arrivals (1972-2006) are plotted in figure 1, while table 1 summarizes the iden-
tified stages of the destination life cycle according to quantitative evidence and
qualitative archival information obtained from the local tourist board (De Cantis
and Volo, 2006).

Figure 1: Arrivals at hotel and para-hotel accommodations (1972–2005)

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 Real estate supply and demand issues in a seaside destination

Stages Indicators
Esploration Unspoiled nature and native culture
(before 1900) First hotel, “Hotel Centrale”, was opened in 1890
Artists and literates will visit during their “Grand
Tour”
Involvement Basic facilities and public infrastructures were created
(1900–1950) for both locals and tourists
Hotels and non-hotel accommodations as well as
restaurants were opened
In 1950 the Cefalù tourist association was created to
promote the destination
Cefalù marina was publicized in printed advertisements
on match boxes
Annual tourism arrivals (A) in this period were less than the 6,430 (5% of the
peak year in the series)

Development Total tourist arrivals in 1972 were 47,267

In 1962 the official tourist board was established
(1951–1987)
It is a well-known and popular destination
Cefalù was publicised through brochures
It attracted the interest of a growing number of external
investors (Club Med).
Annual growth rate (A*) is more than half the standard deviation of the annual
growth rate for the period for which data were available

Consolidation Decrease in the arrival growth rate

(1988–present) Focus on overcoming seasonality of demand
Tourism is considered essential to the economy
Promotion of a new integrated product with the
following slogan “Cefalù within the Madonie Park”
Decrease in occupancy rates
High number of repeat visitors
High share of second homes
Stagnation No signs qualitative signs but change in annual growth
rate
Annual growth rate (A*) moves progressively between + 0,5 SD

Post-Stagnation: No signs
Rejuvenation or decline
Source: Adapted from Getz (1992) and Haywood (1986)

Table 1: Cefalù destination life cycle stages and indicators

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According to the analysis, Cefalù is at the consolidation stage and is approaching a

stagnation stage. A decrease in the arrival growth rate characterizes this period in
both domestic and foreign arrivals, as Haywood suggests, this stage is characterized
by an annual growth rate between minus one-half and plus one-half the standard
deviation of annual growth rates for the total period. Figure 2 represents the annual
growth rates and their moving average.

Figure 2: Annual growth rate and moving average of arrivals (1972-2005)

The low occupancy rates in traditional lodging accommodations and the presence
of a relatively high number of second homes are also signs that the destination is
reaching the stagnation stage.

4.2 Traditional tourism lodging accommodations

In 2006, Cefalù had a combined hotel and non-hotel tourism bed capacity of 6,588
distributed between 22 hotel accommodation establishments with 3,651 beds and
25 non-hotel type (camping, agro-tourism, cottages, and rooms, houses and apart-
ments officially registered as accommodation establishments) with 2,937 beds. The
dynamic of the demand is depicted in figures 3 thru 6. Tourist arrivals in 2005 were
132,546 of which 44% were Italians and 56% international tourists, the Italians
stayed on average 4.25 nights, while foreigners stayed 5.77 nights on average. As
can be seen from figure 3 thru 6, tourist flows are quite stable in these years. Only
the international arrivals seem to grow. However their average length of stay is
seen to be reducing. International tourists come mostly from France (31% of the ar-
rivals in 2005), Germany (19%), UK (13%), and USA (6%), whereas the domestic
arrivals are mostly Sicilians. Regional tourism therefore, contributes a significant
share (49%) of the demand.

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 Real estate supply and demand issues in a seaside destination

From visual inspection of these data, seasonality can also be seen in the tourism
monthly time series with a clear pattern that repeats in systematic intervals over
time.

Figure 3–6 monthly time series (1999–2005) of arrivals and overnight stays for ori-
gin of the flows

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Figure 6: Overnight stays

A pronounced seasonal pattern of tourism can be seen in the original time series as
plotted in figures 3 thru 6, although it shows differences between the markets of
origin. Arrivals and overnight stays plots show high concentration of Italians vaca-
tioners in the month of August when they also tend to have a peak in their length of
stay. International tourists’ demand on the other hand exhibits a different seasonal-
ity. The moving average (grey line in the figures) confirms that the two markets
behave differently in aggregate than they do individually, both in terms of total ar-
rivals and overnight stays. From the data presented in figure 5 and 6 it can be seen
that the international visitor market to Cefalù is much less seasonally peaked than
the Italian market and a number of important characteristics are worth noting.

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 Real estate supply and demand issues in a seaside destination

The international tourists’ arrivals series show peaks in the shoulder seasons one
between April and June and the other in September and October. They guarantee an
occupancy level of at least 25% between May and September, whereas the Italians
reach their peak in July and August, with an occupancy level of almost 25% and
more than 45% respectively.

5 Real estate tourism market

5.1 Supply: Patterns and issues
The result of the Internet search has shown that when entering the request “Cefalù
vacation houses” and “Cefalù holiday houses” several offering came out from (1)
real estate agencies that offer houses for rent, and (2) individuals offering some of
their rooms or full houses or villas for rental to tourists. Private household owners
who are turning their second, and sometimes first, houses into real estate tourism
businesses represent the majority of these accommodation offerings while real es-
tate agencies play the role of intermediaries. The accommodations offered from
such operators, whether we consider the individuals or the real estate agencies, ap-
pear less standardized than those offered by the official hospitality operators: they
vary from apartments in the center of the town or close to the shores, from tradi-
tional houses of fishermen to beautiful villas in rural zones and much more. To the
core product, real estate operators associate additional services so as to shape and
distinguish the various levels of the product offerings, and the distribution channels
vary from the indirect, more or less long, to the direct. Finally, promotion and price
seem sufficiently sophisticated to capture a range of tourists with different wants by
offering a corresponding range of differentiated product promises. The dimension
of these lodgings are variable, and the prices that both the agencies and the indi-
viduals charge are very structured and they distinguish, at minimum, between five
different pricing levels: very low season, low season, medium, high and very high
season. In particular, the more sophisticated ones offer weekly-differentiated prices
showing a complex yield management that not even the traditional lodging estab-
lishments practice. From the field investigation it was possible to confirm this evi-
dence and moreover to verify that some individuals are willing to rent, not only
their second-houses but also their own house, or rooms in their villas, and they are
able to manage price on the basis of the demand. Finally, these individuals that do
not use real estate agencies to rent their property, offer additional services such as
boat tours, rental of bikes or motorbikes and transportation to and from the train
station, creating an even less standardized experience for the tourists.

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The use of distribution channels is even more sophisticated; the facto real estate
agencies operate like tourist intermediaries, offering to the owners of apartments a
huge distribution system and a very organized managerial structure with good
communication especially through the Internet.

Indeed, the web sites of such agencies act also as a form of promotion. All the web
sites have several photos of the lodgings, their description, availability, prices and
means of payment, rules for the rental, and any other information the tourist may
need or desire before arriving at the destination. These web sites, although graphi-
cally less sophisticated, their content can be considered at the same level as some
small hotels. Moreover, advertising materials from real estate companies, such as
simple flyers, business cards or little posters were available throughout the destina-
tion, promoting the offering of private accommodations. Very rarely, and with a
clearly limited budget, other means of promotion – e.g., advertising in real estate
magazines and some local or regional newspapers – were used. The real estate offer
is introduced to the tourist in simple ways, takes advantage of the word-of-mouth
and the uses the extensive capabilities of Internet, whereas advertising is limited,
and personal-contact sale is used only during the low demand season.

Although the real estate market in Cefalù seems to offer a more authentic tourism
experience, providing “real typical seaside lodgings” and all tailored additional ser-
vices, they are deficient in customer assurance; they do not respect price regula-
tions nor is the quality of the lodgings guaranteed. Moreover, during the summer
months the requested minimum stay is of a week, from Saturday to Saturday, and
for shorter time frames the customer will pay the equivalent of a weekly usage.
However, this seems to be a modest price to pay for being able to find accommoda-
tion during the peak season when certain segments of the official supply are not
able to satisfy demand.

5.2 Demand: Patterns and issues

The three groups identified, from the secondary data, were tourists staying at: (1)
hotel or hotel-type of accommodations 596; (2) real estate properties used as tour-
ism accommodations 863; (3) other tourism accommodations 189. However, for
the aim of this study only the first two groups were analysed and compared for a to-
tal of N = 1,459. Of this sub-sample the majority of the surveyed tourists were male
(68.3%) and 31.7% female. The most common area of origin for these tourists was
Sicily (34.5%) followed by all the other Italian regions for a total of 50.5% and the
remaining 15% were foreigners. The two most represented age groups were 25 to
44 year (51.4%) and 45 to 64 years (37.6%). The chi-square analysis depicted in
table 2 evaluates the association the geographical origin of the tourist and their
choice of accommodation type.

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 Real estate supply and demand issues in a seaside destination

Accommodation
Hotel Real estate
Origin n % n %
Sicilians 64 10.7 439 50.9
Italians 396 66.4 340 39.4
International 136 22.8 83 9.6
Chi-square = 256.67, df = 2, p < 0.000

Table 2: Chi-square analysis of tourists of different origins who use hotel or real estate
type of accommodations

The results in table 3 reveal the differences in behaviour of those staying in real es-
tate accommodations versus those staying in traditional hotel accommodations.
Those who use real estate accommodations more typically travel with family
(72.4%), use their own car to reach the destination (78.7%) and typically stay
longer than two weeks (29.1%). The average length of stay was 9.09 for the hotel
tourists (range 1–28) and 15.15 for the real estate tourists (range 1–120). The sig-
nificant chi-square statistics computed on the data displayed in table 3 indicates
there is an association between the tourists’ choice of accommodations and
(a) the duration of their stay,
(b) the travelling party, and
(c) the travelling method.

Accommodation Total
Hotel Real estate
Travelling party
Alone 2.5 5.9 4.5
With family 64.9 72.4 69.3
With friends 32.6 21.7 26.1
100 100 100
Chi-square = 27.94, df = 2, p < 0.000

Travelling method
Own car 49.1 78.7 66.7
Rented car 8.2 3.8 5.6
Train 13.7 10.4 11.7
Boat 1.5 0.2 0.8
Coach 17.5 1.6 8.1
Plane (regional airport) 8.6 4.5 6.1
Other 1.2 0.8 1.0
100 100 100
Chi-square = 186.05, df = 6, p < 0.000

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Serena Volo

Length of stay
1 to 7 nights 49.5 36.9 42.0
8 to 15 nights 47.0 34.0 39.3
16 and more nights 3.5 29.1 18.7
100 100 100
Chi-square = 151.57, df = 2, p < 0.000

Table 3: Travelling behaviour of tourists in Cefalù (values in percentage)

Table 4 presents the expenditure patterns, and by the information on this table and
considering the average length of stay it can be seen that real estate tourists are
likely to spend less despite the fact that on average they have longer stays.

Accommodation
Hotel Real estate
Mean 1,470.86 1,340
SD 863.14 1,108.41
n 596 863

I quartile 850 500

II quartile 1,500 1,000
III quartile 2,000 2,000

Table 4: Tourists expenditures by type of accommodation used (in euros)

Other aspects of the purchasing process were also analysed regarding tourists’ in-
formation gathering and the timing of their accommodation decision. While 95.2%
of respondents who stayed at paid real estate properties had found their accommo-
dations before departing their home town, only 88.3% of those staying at hotel had
done so. As for the source of information on accommodations, those staying in paid
real estate accommodations had either personal knowledge (e.g., previous visit) of
the accommodations (39.8%) or followed word-of-mouth advices (25.5%), used
commercial sources such as brochures or Internet websites (14.6%), real estate
agencies (11.6%) or travel agencies (5.4%). In contrast, those staying in hotel-type
accommodations had relied mainly on travel agencies (51.4%) and much less on
the other sources: personal knowledge (22%), word-of-mouth (9%), and commer-
cial information (13.0%).

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 Real estate supply and demand issues in a seaside destination

6 Marketing reflections
The findings show that the destination life cycle model does serve as an adequate,
if imperfect, descriptive model for characterizing the development of the Cefalù
destination, including its signalling of an approaching stagnation stage. This may
not be considered an encouraging finding from a practical standpoint and may be
related to the general trend of Sicily. On the other hand the real estate accommoda-
tion market is capitalizing on this trend by viewing it as an opportunity for expan-
sion. The question that arises now is “would the destination be able to stretch the
consolidation stage?” Here there would seem to lay some opportunities for the real
estate accommodation suppliers. Indeed, the revitalization of the destination could
be determined with their contribution, but this will need a focus on a more long-
term approach that typically these spontaneous tourism operators do not seem to
have.

The findings also show that there exists a strong seasonality in tourism demand in
Cefalù. However, the analysis of the monthly time series of traditional lodging es-
tablishments shows a different seasonality pattern among Italians and international
tourists, which is consistent with other Sicilian destinations: a one peak series for
Italians and a two peak series for International tourists. Traditionally, marketing
and management measures to overcome the unfavourable consequences of season-
ality and its related capacity underutilization in the off season and excess demand
in the peak season have had to contend with the relative immobility of supply fa-
cilities which cannot be changed or redeployed in the short term. However, in these
popular seaside towns, a number of additional accommodations are offered to the
tourism market from individuals willing to rent their second homes and vacation re-
treats, filling in the gap of unsatisfied demand.

This phenomenon has significant practical economic and marketing implications

and deserves specific consideration. In a market in which two layers of supply co-
habit and one is relatively flexible, unregulated and has nonexistent or very low
maintenance and labour costs, there exists the risk of creating an even more unbal-
anced market, due to the long lead time necessary for the traditional lodging estab-
lishments to renew or enlarge themselves. The consequence of this situation is that
in the long term the market can have a different character or the destination could
encounter decline due to changing mix of clientele attracted by the real estate ac-
commodations. Moreover, from a practical short term marketing point of view, the
simple but effective yield management that real estate accommodations practice is
affecting the small hotel and the para-hotel establishments that suffer high costs of
maintenance during the low season.

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Moreover, the small traditional lodging accommodation that suffer low occupancy
rate even during the peak seasons cannot fully use the leverage of price at their
benefit, as “next door” there may be a privately owned apartment that can host a
whole family with lower prices. Ultimately, the great natural differentiation of real
estate offerings is, for the better or worse, difficult to imitate.

However, several opportunities emerge from this study for both markets, i.e., tradi-
tional tourism establishments and real estate accommodations. From the result of
the survey, the profile of tourists using the real estate accommodations seem to be
highly differentiated. Regional tourist that travel by car with their family, spending
relatively less and staying longer than two weeks are the main customers for the
real estate accommodation. Further, since these tourists also exhibit different pur-
chasing process patterns, they should become the real estate accommodations’ tar-
get market and solicited with appropriately prescribed marketing actions. At the
other end of the spectrum, traditional lodging establishments have the favour of
Italian and international tourists that altogether, if well served, could guarantee a
good occupancy rate for about 7 months of the year. If these demand behaviours
are confirmed in a longer-term time series and larger studies, they represent great
opportunities for package diversification among local tourism operators.

Little can be said from the present study about the capability of effecting a spatial
redistribution of tourists through marketing strategies or partnership with close by
towns, and although some effort in this direction has been made with the rural areas
south of Cefalù, a more detailed analysis is required to evaluate the ability of the
destination to create beneficial cooperation with other tourism areas and their op-
erators.

Finally, it is worth noting that the regional and local authorities ignore the real es-
tate accommodation market, but that this is mostly due to the unofficial character of
the lodgings and the lack of authorization to operate as tourism businesses. While
the timing in the destination life cycle could call for immediate and coordinated ac-
tions, a myopic attitude is likely to mislead the management decisions. A planned
and balanced development of the holiday property market and a regulation of the
real estate rentals should be the priority of destination organizations.

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 Real estate supply and demand issues in a seaside destination

7 Conclusions
An analysis of real estate demand and supply and its comparison with traditional
lodging establishment in Cefalù, has shed light on the sophisticated structure of the
real estate tourism market. The findings highlight both positive and negative effects
of holiday properties on tourism destinations’ development and emphasize the role
that regional and local authorities should play in managing a balanced development
of the holiday property market and to regulate real estate rentals. It is also con-
cluded that real estate properties may help many tourism destinations to revitalize
their offerings and to avoid decline while, in some cases, offering a unique experi-
ence to tourists.

Limitations of the present study include:

(a) the use of secondary data collected during the summer months while Italian,
and especially Sicilian, tourism is at its peak, but international tourism is not;
(b) the explorative nature of the study of intermediaries’ website and therefore the
impossibility to generalise findings; and
(c) last but not least the role of the destination tourism agencies and the govern-
ment which needs to be investigated in greater detail.

It would also have been useful to evaluate regional and country-of-origin differ-
ences instead of just the Sicilian, Italian and aggregate international level, and fu-
ture research should include this more granular level of analysis. Further investiga-
tion should also include an analysis of the motives of travelling as different patterns
may emerge when comparing different segments.

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 Section 5:
Real Estate Strategies for
Destinations

215
Real estate private equity investment and its impacts
on the business development strategy of international
hotel companies in European tourism destinations

Klaus Weiermair & Jörg Frehse

Abstract
Real estate private equity funds are investing in European tourism destinations like
never before. By contrast, international hotel companies are behaving very differ-
ently. Whilst the 1990s saw operators forming the biggest buyer category, hotel
chains in the meantime still represent the largest group of sellers in European tour-
ism destinations. Despite this, they are still succeeding in achieving disproportional
growth. This paper begins by analysing this phenomenon. On the basis of both
theoretical and empirical findings and case studies, the paper demonstrates the im-
pacts and effects of the ongoing real estate private equity investment boom on the
business development strategy of international hotel companies in Europe.

Keywords: Real estate private equity, internationalization, eclectic theory, MNE

activity, hotel industry, hotel chains

1 Introduction
Hotel Real Estate Investments in Europe are currently booming. With a total vol-
ume of EUR 23.2 billion, 2006 saw more investments in single hotel assets and
portfolios than ever before. And despite the mortgage crisis in the US, the total ho-
tel transaction volume for 2007 will apparently reach the levels of the previous re-
cord year (Anon., 2007, p.47). Meanwhile, it is primarily Anglo-American financial
investors who are executing high-volume hotel investments in European tourism
destinations to an as yet undetermined extent. As figure 1 illustrates, real estate pri-
vate equity funds were responsible for 38.9% of all of last year’s hotel investment
volume.

217
Klaus Weiermair, Jörg Frehse

2 5 .0 0 0 23 .2 4 4

2 0 .0 0 0

1 5 .5 85
14 .2 0 7
1 5 .0 0 0

1 0.1 1 6
9 .1 4 2 9 .0 3 7
1 0 .0 0 0 8 .5 77

6 .7 0 3

5 .29 9 5 .8 6 6 5 .4 6 8

5 .0 0 0 3 .7 6 7
2 .7 1 1 2 .4 3 9
1.5 3 2

0
2002 2003 2 00 4 2005 2006

P riv a te E q u ity In ve s to rs O th e r In v e s to rs T O TAL

Figure 1: Hotel investment volume in Europe 2002–2006 (in Mill. Euro)

Source: Jones Lang LaSalle Hotels 2007

Declining yields in the US and, when compared internationally, low room yields
with a strong upside potential in continental Europe have attracted financial inves-
tors. Conversely, the traditional group that has invested in European tourism desti-
nations is behaving quite differently. Open and closed ended real estate funds are
still seeking hotels to operate them under long term lease agreements, ensuring
predicable cash flows. International hotel companies are also acting with signifi-
cantly lower frequency. As figure 2 shows in 2006, hotel chains were responsible
for only 20% of the total hotel investment volume in Europe (Jones Lang La-Salle
Hotels 2007).
80%

72
70%

68 64
60%

50%

40%

35
29
30%

24 20
20%
20 19

10%

0%
1998 1999 2000 2001 2002 2003 2004 2005 2006

Figure 2: Hotel investments of hotel chains in Europe as a % of all hotel investments

Source: Jones Lang LaSalle Hotels 2007

218
 Real estate private equity investment in international hotel companies

It is therefore all the more surprising that international hotel companies have shown
a significantly disproportionate growth, even in secondary European business loca-
tions and in resort destinations, despite the worldwide hotel crisis in the aftermath
of the 9/11 attacks and the sharply curbed investment activities. While the world’s
ten largest hotel chains operated more than 28,448 hotels with 3,365,798 rooms in
2001, during the past five years this number has grown rapidly to 32,207 hotels
with 3,903,050 rooms in 2006.

Given this expansive growth within the tourism industry, tourism researchers are
faced with the following research question: How have international hotel compa-
nies succeeded in growing disproportionately in European tourism destinations at a
rate that nearly corresponds with the increase of private equity investments suggest-
ing a relatively new development on the European real estate market, and this de-
spite massive restriction of their own hotel investment activities since the beginning
of this decade?

Using Dunning’s eclectic paradigm as the theoretical backdrop this paper attempts
to analyse this phenomenon. In the second chapter the ownership, location and in-
ternalization (OLI) theory are shown to be of particular interest for the underlying
research for two reasons. On the one hand, Dunning and his co-authors have found
empirical confirmation for applying the eclectic theory to derive the institutional ar-
rangements of international hotel chains (Dunning & McQueen, 1981; Dunning &
Kundu, 1995; Kundu, 1994). On the other hand, the theory’s paradigm serves to
also explain the cross-border activities and investments of international hotel com-
panies. Against this backdrop, this paper simultaneously investigates whether the
eclectic theory continues to display high practical relevance in light of the current
structural changes and developments in capital and real estate markets.

The third chapter provides an overview of the current treatment of hotel real estate
private equity within the literature including a definition and delineation of the term
“private equity” particularly as regards the hotel industry. In turn, this definition is
harmonized with the characteristics of the special asset class of hotels.

Our key focus of the paper, however, comes in the fourth chapter. In light of cur-
rent industry developments and case studies from the field of hotel real estate will
attempt to show the complementary interests between private equity investors and
international hotel chains. Here it will be shown that international hotel companies
no longer will be interested primarily in direct investments in European tourism
destinations, proving also reason as to why they no longer have to be. The paper
concludes with a summary of results and implications for the future of real estate
investments for hotel development.

219
Klaus Weiermair, Jörg Frehse

2 The eclectic theory’s contribution to scientific knowledge

Slogans such as “the subprime swamp”, “US mortgage crisis”, “real estate locusts”
or the internal rate of return expectations of international financial investor, which
are well-above market average, have all contributed to the image that any involve-
ment with institutions and activities generally considered part of the property mar-
ket now has to run the whole gamut of economic, social and political controversy in
Europe as well. The practically-minded daily and trade press similarily contain a
large number of articles on the current investment boom in European property mar-
kets. This level of public attention and its increased importance however, have not
been matched by an increased research interest in the subject of real estate private
equity investments in European tourism destinations judging by the scarcity of pub-
lications in academic and professional journals.

One is therefore bound to conclude that the ongoing practices and behaviour of the
property sector, which also deal with hotel properties, are currently reacting faster
to the identified investment and growth dynamics than the field of tourism research.
Nevertheless, there exists now a range of theoretical and conceptional approaches
concerning the international growth of hotel companies illustrating the process of
internationalisation (cf. e.g. Reis 1999; Weiermair/Peters 1999; Vorlaufer 2000; Pe-
ters 2001). All these deliberations attempt to identify recent and practice-related
phenomena associated with different forms of cross-border investments. There has
so far however been no examination of the identified investment boom in hotel real
estate private equity and its effects on the growth behaviour of international hotel
companies.

Concerning available theories of internationalisation which also consider various

strategies of market entry, Dunning’s eclectic theory, also formulated for interna-
tional hotel companies, is a particularly significant approach to explaining patterns
of internationalisation and growth. Building on the three theoretical foundations of
international monopoly theory (Hymer 1976), location theory (Ohlin 1933) and in-
ternalisation theory (Coase 1937), the eclectic paradigm for explaining the different
forms internationalisation across different countries can be used, which depends on
the following three factors:
– Ownership-advantages (O),
– Location-specific-advantages (L) and
– Internalisation-advantages (I).

Research in tourism also draws on the eclectic paradigm to explain the type of insti-
tutional arrangements made by hotel companies in foreign markets (Kundu 1994;
Reis 1999; Vorlaufer 2000). According to this view a hotel company must first and
as an absolute prerequisite have ownership advantages.

220
 Real estate private equity investment in international hotel companies

If in addition location specific advantages in the target country are attractive then
production will be relocated. For international hotel companies this corresponds to
a contractual transfer of resources by signing a long-term franchise, management or
lease agreements. Finally, internalisation advantages depend on conditions in indi-
vidual countries. Here the different levels of imperfection in the factor markets in
which international companies operate are of particular importance (Dunning 1977,
p. 408 et seq).

At increasing levels of internationalisation the importance of the target country’s

characteristics declines, however, as hotel companies become capable of combining
the individual types of advantage in the individual markets in which they operate.
In these situations contractual agreements are no a longer a suitable form for inter-
national market entry and the hotel industry also turns to direct investments in
owner-operated hotels (Dunning/Kundu 1995, 129; Reis 1999, 44; Weier-
mair/Peters 1999, 17 et seq). The following figure 3 provides a further overview of
the market entry decision making process:

Ownership Advantages No No Internationalization

Yes

Internationalization

No Export
Location Specific Advantages

Yes

Going International

No Cooperation
Internalization Advantages
Agreements
Yes

Foreign Hotel Investments

Figure 3: Interpretation of the eclectic paradigm

Source: Welge/Holtbrügge 2006

221
Klaus Weiermair, Jörg Frehse

Dunning’s eclectic paradigm is currently viewed as the most comprehensive theory

of international company operations (Peters 2001). Due to the limited investment
activities of owner-operators as shown before, it is questionable whether Dunning’s
eclectic theory which proofed so useful in the mid eighties to nineties continued to
explain investment behaviour in the last decade.

3 Definition and specificities of the hotel real estate private equity market
in Europe
Even the general term private equity and the specific term real estate private equity
have so far been interpreted quite differently and sometimes confusingly in the lit-
erature across different disciplines (Nathusius 2001, p. 55). This fundamental issue
of different interpretations is largely based on the fact that the term being defined is
often not the result of a theoretical construct but rather stems from practices and
behaviour of the real estate business.

Accordingly, the term private equity is used differently in international research.

Especially confusing is the multitude of terms and definitions used in the USA and
Europe (Fenn/Liang/Prowse 1995, p. 2; Kraft 2001, p. 31, Nathusius 2001, p. 53f.).
The private equity concepts described in the cited literature for the most part not
specifically targeted or related to specific real estate asset classes.

As follows, the term private equity is defined here in a way that encompasses the
particularities of the real estate asset classes: Real estate private equity is a type of
finance instrument in which external investors provide capital resources for short to
medium-term investments in all typological and geographical real estate markets
through generally unregulated fund solutions, usually with a high proportion of
debt. If required, active asset management support is provided. Investment catego-
ries can be established and development properties or real estate portfolios, non-
performing real estate loans and real estate companies can be created. To realize
above-average high returns on equity, (which is calculated on the basis of the inter-
nal return on net worth), it is understood right from the outset that the real estate
equity is to be sold subsequently.

Increasing the performance of hotels operated under franchise and management

contracts offers the best potential for capital gains in the course of this future exit.
This is because many hotels do not make full use of their economic potential. And
to the extent that changing the operator or the brand name, or performance and as-
set management by a private equity investor can be expected to improve cost-
efficiency, these types of contracts then include in the valuation the improved oper-
ating results in full (Frehse 2004, p. 449 et seq).

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 Real estate private equity investment in international hotel companies

This means that franchise and management contracts offer the greatest business
risks, but also the highest potential rewards for hotel investors and/or owners.

Right up to the start of this decade risk-averse continental hotel investment markets
have been dominated by a fundamentally different concept and type of contract.
Open and closed-end property funds prevailed. This group of institutional investors
still prefers investments in hotel properties operated by hotel chains on the basis of
fixed long-term leases.

Earnings, in the form of lease payments, only rise in line with inflation, i.e. by
means of index clauses. This suggests that real estate fund have also capped their
potential long-term return at currently around 5–6% in Europe and never participate
in good operating results from their hotels. So whilst conventional hotel investors
base their purchase decision exclusively on the secure long-term yield for a low
business risk, international private equity managers always focus on the successful
exit at a considerably higher property valuation (Holzmann/Frehse 2007).

4 Empirical findings regarding the growth strategies of hotel real estate

private equity investors and international hotel companies
Empirical analyses of private equity investments and their impact on the business
development strategy of international hotel companies in European tourism destina-
tions always face the problem that in the hotel industry decision-making processes
are rarely fully documented. Gaining access to this documentation is also generally
very difficult due to the sensitivity of the data. Furthermore as in the present case
the researcher is not present when these decisions are made, but has to post hoc try
to discover the circumstances and interdependencies of events which took place
five years ago. It is therefore advisable to question decision-makers in the individ-
ual hotel companies directly regarding the decision-making components and proc-
esses which are of interest.

Our primary objective in the framework of the present empirical study was to iden-
tify reasons and/or determinants which influence the current decisions of hotel
com-panies in terms of the choice of institutional arrangements. The relationship
be-tween these influencing factors and growth behavior are to be made explicit in
the process. Specifically, this should confirm the factual evidence of interrelation-
ships between the continuing boom in hotel real estate private equity investments
and the growth behaviour of international hotel corporations.

223
Klaus Weiermair, Jörg Frehse

Thus the objective of the empirical analysis was not limited to providing a purely
descriptive depiction of the growth behaviour of international hotel companies, but
instead aimed at obtaining empirical support for theoretically based assumptions
and relationships provided so far in terms of predictable changes within the growth
strategy. In the analysis, determinants will be distinguished from one another and
specified using the example of the European key hotel market Germany. Because
the primary objective was to gain a deeper understanding of the complementary
growth behaviour, it is much more useful to generate as many possibly relevant cri-
teria at this point as to check a few theoretically reduced criteria statistically on the
basis of central hypotheses.

The qualitative format of the empirical study, furthermore, offered the opportunity
to learn more about suspected additional intervening variables by expanding the
original theoretically and conceptually founded suppositions through direct inter-
views, which is to say, by way of qualitative methods. To achieve this, the inter-
viewed lead hotel managers in the departments of expansion, hotel development,
business development, and enterprise development were given the opportunity at
the time to provide extensive comments beyond presently existing guidelines. An
“open concept” was therefore pursued because current events on capital markets
and the internationalization of the hotel business represent rather multifaceted and
hard-to-standardize areas of inquiry the complexity of which can only be grasped
through extensive explanations and supplementary questions.

The top 50 hotel companies published on an annual basis in the series of the journal
“Allgemeine Hotel- und Gastronomiezeitung – Der Hotelier” German hotel compa-
nies (“Die Top 50 Hotelgesellschaften in Deutschland,” Alberti 2007, p. 1) served
as the sample for the study. These hotels, however are, also in part included as hotel
companies which are still national in their orientation, such as Arkona, Welcome
Hotels, and Motel One. Given our research question, only those hotel companies
were included in the empirical study who own, operate, or market at least one hotel
in a foreign market and who therefore in the framework of their internationalization
process have to make decisions on the design of their market-entry-based options
abroad.

It was also appropriate to exclude hotel companies who in Germany do not achieve
minimum sales of 75 million euros or less. On the basis of these restrictions, the
potential limits for international direct investments due to a lack of financial re-
sources among smaller hotel companies are avoided.

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 Real estate private equity investment in international hotel companies

Furthermore, hotel companies were eliminated from the study who focus purely on
cooperative configurations in the framework of their internationalization strategy as
they qould not provide statements with regard to their growth behavior in terms of
wholly-owned subsidiaries. This applies, for example, to the US hotel company
Best Western, who traditionally pursues its cross-border growth exclusively by
concluding franchising contracts.

These restrictions left us with resulting 16 hotel companies, of which 13 decision-

makers could be interviewed personally for this study. It is also due to this rela-
tively limited number of interviewed subjects that it is generally not possible and
useful to apply multivariate analytical processes (Wesnitzer 1993, p.138). As men-
tioned above, the results presented should rather be interpreted as pilot results re-
garding changed market entry behaviour of hotel companies and not as tests for
competing theory hypotheses generated. At the same time, the type of analysis and
the large number of open questions remaining render the use of special statistical
software not very meaningful.

In presenting the results it is first interesting to note, that in the past hotel compa-
nies listed on the stock market, such as Accor, InterContinental, Hilton or Starwood
primarily used open capital markets to access additional liquidity in order to fi-
nance growth via direct investments during the tourism boom years 1995–2000.
The crisis year 2001 caused share prices of these companies to drop sharply, as the
international hotel industry reacted seismographically to the terrorist attacks of 11
September. Quoted hotel companies were therefore hit much harder by falling
prices than the market average. The share price slump led in turn to an ever-
widening gap between the market capitalisation of the hotel companies on the one
hand and the net book value of the hotels owned by owner-operators on the other
hand.

Real estate private equity funds first took advantage of this opportunity in the USA.
They bought up the companies and sold the hotel properties as part of the subse-
quent restructuring process, thus becoming the first to separate hotel ownership
from hotel operations. In the opinion of the hotel managers interviewed it was prin-
cipally declining yields in the USA, and cheap room rates by international stan-
dards which brought in recent years financial investors to Europe. The introduction
of the euro also made cross-border transactions much easier and more transparent.

For the German hotel market a majority of those interviewed did not believe that
low capacity levels and room rates would continue for ever. They also felt that
many hotels were not making full use of their economic potential. At the same time
they noted a scarcity of equity and debt in the German hotel industry.

225
Klaus Weiermair, Jörg Frehse

In the opinion of almost all the interviewees this means that under the heading of a
“German recovery”, foreign hotel real estate private equity managers see wide-
ranging opportunities for investment in the major European market in a real estate
sector which they know intimately from their home markets.

For these reasons some interviewees stated that at the moment hotel companies
were practically obliged to sell properties based on their balance sheet results. De-
spite the finance and mortgage crisis an enormous amount of capital continues to
flow into the German market for hotels deals. In 2007 alone hotel properties valued
at EUR 2.3 billion changed hands (o.V. 2008, p. 17). Hotel companies therefore
currently see themselves in a comfortable position as potential sellers: interest rates
and therefore yields are still low and prices are high.

Our interview results tentatively support the hypothesis that the growth behavior of
our sample international hotel corporations have in fact changed during the period
from 2002 to 2006. Direct investments into wholly-owned enterprises hardly play
any longer a role in the framework of the international growth strategy. On the con-
trary, sustained hotel sales activities can be identified even on the German hotel
market. Whereas the interviewed hotel companies possessed 62 wholly-owned op-
erations in the year 2002, only 38 remained so by the year 2006. Figure 4 also illus-
trates in summary that the hotel companies studied grew above all by increasingly
concluding franchising and management contracts in the process of transferring
contractual resources. In contrast, the number of leasing contracts, as anticipated,
generally was in slight decline.
500
469
447 452
450
439 431
400

350
Number of Hotels

298 314
300

250
223 223
214
200

150

100
62 62 62
47
50
38

0
2002 2003 2004 2005 2006

Franchise- & Management Agreements Lease Agreements Direct Investments

Figure 4: Growth behaviour of hotel chains in Germany 2002–2006

Source: own findings from interviews

226
 Real estate private equity investment in international hotel companies

5 Implications for tourism research and hotel practices

Despite the limitations mentioned earlier, the analyis and interpretation of the em-
pirical results for the German hotel market demonstrate exemplarily that the inter-
national hotel companies interviewed continue to be able to grow faster and with
less risk in European tourism destinations than at the turn of the millennium.

Direct investments in hotel properties are no longer a prerequisite for ubiquitous

market penetration. Hotel chains, which private equity investors consider to be
valuable partners, are now explicitly proposing contracts in which the owner retains
the fundamental investment risk but is able to benefit from a good performance and
a correspondingly higher cash flow.

Overall the growth data for hotels on which this paper is based justifies the general
proposition that a connection exists between the ongoing real estate private equity
boom and the growth strategy of the hotel companies which benefit by it. Espe-
cially Anglo-American financial investors in particular are interested in acquiring
operator-free hotels or hotels run on the basis of franchise and management con-
tracts, because only in these cases can targeted value increases be achieved which
are required for a profitable sale.

The reverse is also true, in that investment and growth strategies currently give in-
ternational hotel companies a new dimension to their expansion, combined with
significantly lower financial risks. Thus the recent sales of hotel portfolios listed
exemplarily in figure 5 below can be seen as a further reflection of this develop-
ment, which has been a practical reality in European tourism destinations too since
the start of the decade. At the same time it must be noted that international hotel
companies’ ambitious and published expansive growth plans should be deemed ab-
solutely realistic.

227
Klaus Weiermair, Jörg Frehse

Portfolio Country Buyer Seller

Holiday Inn Portfolio LRG Acquisition
United Kingdom InterContinental
(73 Hotels) Limited

Accor Portfolio France,

Foncière des Murs Accor
(76 Hotels) Belgium

Crowne Plaza & Holiday Continental Westbridge Hospitaliy

InterContinental
Inn Portfolio (24 Hotels) Europe Fund

Marriott Portfolio
United Kingdom Royal Bank of Scotland Marriott
(46 Hotels)

InterContinental Portfolio Continental

Morgan Stanley InterContinental
(7 Hotels) Europe

Accor Portfolio
United Kingdom Land Securities Accor
(30 Hotels)

Scandic Portfolio
Scandinavia EQT Partners AB Hilton
(132 Hotels)

Mac-Donald Hotel Portfo-

United Kingdom Moorfield Group Mac-Donald Hotels
lio (24 Hotels)

Hilton Portfolio Continental

Morgan Stanley Hilton
(10 Hotels) Europe

Accor Portfolio Germany,

Moor Park Capital Accor
(91 Hotels) Netherlands

Figure 5: Selected portfolio transactions by international hotel companies

Source: own data collection

The paper has also shown that the group of hotel investors, which in the past had
been broadly diversified, are now abandoning the monoculture which prevailed up
to the turn of the millennium in which the investment behaviour of open and
closed-end real estate funds were the prime catalyst for deals on domestic markets.
In this respect real estate private equity investors have been undeniably successful
in entering into an inefficient market situation. As figure 6 illustrates, this was of-
ten the only way to reconcile supply and demand for hotel properties and to elimi-
nate the disequilibrium present for hotel transactions on most continental European
markets.

228
 Real estate private equity investment in international hotel companies

Figure 6: Changing structures on the continental European hotel transaction market

Source: own description

In the theoretical discussion the field of hotel real estate private equity in particular
and the internationalisation of service companies in general both still represent a
very young and hitherto neglected area of business research (Bruhn/Hadwich 2005,
p. 122). Although a research debate did at one time focus on internationalisation is-
sues in the mid 90s (Bruhn 2005, p. 34), by the end of the century research interest
had abated relatively quickly (Knight 1999, p. 352). Despite a sharp increase re-
garding the practical significance of varied international market entry options it is
evident that there are still gaps in research (Javalgi et al. 2003, p. 186) which offer
considerable scope for future empirical research.

The above inquiry and empirical results have attempted to challenge parts of Dun-
ing’s eclectic paradigm regarding direct foreign hotel investments in a completely
different market environment. Unfortunately the vast majority of hotel managers
interviewed were only responsible for national growth strategies. In the long-term it
would therefore be desirable to move the study to a European level and at the same
time to investigate whether the end of the financial crisis will be accompanied by a
relapse into former patterns of behaviour.

229
Klaus Weiermair, Jörg Frehse

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231
 Development of destinations and real estate in a
tourism region – An application of life cycle theory

Markus R. Schuckert & Philipp E. Boksberger

Abstract
The usable space in mountain regions such as the Alps is very limited. Up to 20%
of the alpine surface can be used for private or commercial activities only and,
therefore, real estate has to be considered as very limited for tourism development.
This paper shows how the long term development of real estate does reflect the de-
velopment of destinations and vice versa. Spatial patterns and disparities in the real
estate market in tourism regions are explained by analyzing longitudinal data of se-
lected destinations in Grisons, Switzerland.

Keywords: Real estate development, alpine destination growth, long term devel-
opment, mountain tourism

1 Introduction
Because of the relation between tourism and the use of space many aspects of tour-
ism have their beginnings in geography. It was in geographic research whereby the
issue of the development of regions under the influence of tourism was gathered for
the first time as an independent research object. In 1909, for example, Bowman
analyzed the tourism-related demand and supply structure of a region and in 1929
Meinecke analyzed the effects of intensive tourism on the environment of a rural
region. Subsequently McMurry (1930) and Joerg (1935) examined the regional ef-
fects of travel and tourism on land utilization and land consumption while Gilbert
(1939) analysed the growth and the development of land and seaside spas and
health resorts in England. However, Miege (1933) and Poser (1939) can be seen as
the first authors that have specifically described the development of tourist places
in terms of destinations.

233
Markus R. Schuckert, Philipp E. Boksberger

Based on these first approaches tourism regions and so-called destinations increas-
ingly became objects of interdisciplinary research projects (Butler 2004). The
analysis of regions as well as the development and growth of land utilization and its
side effects became more and more important in research (Smith 1982). In a rising
number scientific contributions kept focussing on the spatial development of tour-
ism regions and their cyclic growth. The consolidation of investigations towards
the subject of a cyclical development of tourism regions can be experienced in the
case studies of Snow and Wright (1976) and the research carried out by Stansfield
(1978). But considering the number, time and the amount of contributions to the
theoretical discussion and empiric research projects as well as the condensing ref-
erence and citation structure in the published articles before, Butler’s work has to
be seen as the central and unequivocal contribution to the subject of life cycle of
tourism destinations. Butler (1980) transferred the product life cycle concept on
tourism areas and developed the model of a six-phase tourism area life cycle
(TALC). Even though Butler (1980: p. 7–9) points to the effects on the real estate
situation during each stage of development in the description of the model, he and
all succeeding scholars missed to explain and to verify empirically any relationship
on real estates caused by tourism development in destinations. Moreover, due to
disparities in the real estate market in tourism regions, questions may be raised as
to how the development of real estates does reflect the development of destinations.
Of course, obviously the space for research within the field of special tourism de-
velopment over time leaves much space for several investigations. For this specific
contribution, the research questions can be formulated as the following:
– How can the development of the real estate situation be described in an alpine
region over time in the long run?
– Can differences be discovered in the development of the real estate situation
considering tourism regions and non-tourism regions?
– Does geographical or spatial relations/cluster of comparable development
dynamics exist?
– What are the important factors that explain spatial patterns in real estate
development in a tourism region?

To answer these research questions this paper analyses the development on the real
estate situation in the case of alpine tourism development. Alpine tourism evolved
slowly but steadily from an isolated phenomenon to a mass phenomenon. Alpine
tourism changed from exclusive to a common tourism product with new challenges
to face (Bieger 2005; Luger/Rest 2002). Firstly, clear changes in motives and ac-
tivities to engage in alpine tourism are recognizable. While the common desire for
adventure, romance and nature experiences driven by artists, poets, sportsmen as
well as scientists was predominant in the 19th century, the positive effects of alpine
climate on health increased the flow of tourists towards the Alps (Kaspar 1995).

234
 Development of destinations and real estate in a tourism region

It then was the expansion and the development of the traffic infrastructure that
forced the rapid expansion of mass tourism in the Alps (Weiermair 2004). Sec-
ondly, the early 1970s brought a significant and lasting change of seasonal propor-
tion from summer to winter tourism and related shifts in demand (Pech-
laner/Tschurtschenthaler 2003). Thirdly, in the course of globalization the Alps
come across new and strong competition with international tourism and leisure
markets that registered a substantially higher and more dynamic development of
demand than alpine destinations (Bachleitner/Weichbold 2002, Keller 2001). Thus,
the development of tourism from growth to maturity and decline or rejuvenation
might have a significant influence with a related range of problem statements for
the real estate development in the high density tourism area of the Alps, especially
considering the following points:
– The usable space is very limited in the Alps. Between five to 20% of the alpine
surface only can be used for private or commercial activities. Compared to
other regions, the space for tourism development has to be considered as very
limited.
– The real estate situation in the Alps can be described as highly fragmented in
consequence of small lots of land from the historic agricultural structure. This
leads to the characteristic situation that various stakeholders (land owners) need
to be involved in a democratic development of alpine destinations.
– Tourism business is generally in competition and in conflict with other
industries in a destination that may create even higher value added for the
region. Additionally, for many of the typical small and medium tourism
enterprises in the Alps their property (real estate) is their only source of own
equity capital resources.
– More and more the market for tourism real estate is in conflict to private real
estate markets for domestic living or second homes as well as retirement homes
for non-domestic parties.

This paper, therefore, reports on the development of real estate in relation to the
development of destinations using data of Grisons, Switzerland – a famous as well
as mature tourism region in the Swiss Alps.

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Markus R. Schuckert, Philipp E. Boksberger

2 Development of destinations and real estate development in the tourism

literature: An overview
Considering Butler’s TALC model limited research has been conducted on selected
participants, key players and structures such as real estate along the destination life
cycle patterns (Ioannides 1992, Lagiewski 2006). Reviewing the relevant literature
it has to be stated, that any research focusing on the subject of development of the
real estate in relation to the development of destinations is missing. Saarinen (2004,
p. 164) states “that the concept of destination is by nature problematic, because it
refers to a varying range of spatial scales in tourism like continents, states, prov-
inces, municipalities and other administrative units or even tourist resorts”. Further
more he finds that “spatial scales and definitions of destinations seem to base on
administrative or other such units are sometimes useful and practical”, but theoreti-
cally destination concepts “tend to approach tourism as a spatial and geographical
phenomenon from a technical and static viewpoint”. Similar Getz (1999) described
destinations as constantly changing products or spaces of a certain combination of
social, political and economic relationships that are specific over time. This overall
process of geographical development and change in tourism has been subject of
theoretical and practical analysis in many ways in tourism studies, including life
cycle analysis in combination with spatial approaches on changing capacities, land-
use patterns, infrastructure or the development of second homes (see e.g. Ker-
math/Thomas 1992; Johnston 2001; Schuckert et al. 2007). The following overview
over the literature underlines that various research approaches touch the topic of
real estate but no study examined the development of the real estate in relation to
the development of destinations or the real estate situation as driving or limiting
factor for the development of destinations specifically:
– Stansfield (1978) described the rejuvenation of Atlantic City through the
legalization of gambling in a case study and emphasized the effects of the
architecture and the land-use on the previous development and decline of the
destination.
– Meyer-Arendt (1985) analysed the destination development of Grand Isle,
Louisiana focussing on environmental degradation by using e.g. building
activity, settlement plans, infrastructure development and capacity.

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 Development of destinations and real estate in a tourism region

– Butler (1985) himself carried out a case study of the Scottish Highlands to
prove his theory of TALC with longitudinal data of two centuries. His focus
was especially on the development of tourism infrastructure and hardware with
no link to real estate.
– Strapp (1988) analysed the development of second homes and their side effects
in a case study of Sauble Beach, Ontario.
– Debbage (1990) finds in a case study of Paradise Island, Bahamas that the
TALC model does neither take the concentration on the supply side nor the
shifts in real estate property and ownership into account.
– Weaver (1990 and 1992) found substantial compliance with the TALC model
and that ownership and control of destination resources affects the stability of
the development by analysing the development of building, capacity or regional
tourism planning but in the cases of Grand Cayman and Antigua.
– In a case of Barbados France (1991) showed the heterogeneous developments
within one area to be considered as destination, taking the number of
establishments, infrastructure and capacity into account.
– Ioannides (1992) took the capacity, the type of accommodation and types of
tourism suppliers for the analysis of the tourism development in Cyprus. He
emphasized the role of government and dependence on foreign tour operators.
– Getz (1992) examined the Niagara Falls under the aspects of carrying capacity
and regional planning using historical and statistical data as well as field
observations and maps with no relevant comment on the spatial development
issues of this destination.
– Williams (1993) analysed the tourism development of Minorca, Spain and
stated that existing industries declined while tourism developed; unfortunately
with no report on real estate markets and exchange effects between these
industries.
– Da Conceição Gonçalves and Águas (1997) found a relation between tourism
destination development in the Algave and regional tourism planning.
– Priestley and Mundet (1998) concluded that the Spanish coastal villages of
Lloret de Mar, L’Estartit and Sitges were in a post-stagnation stage, using hotel
capacity for analysis with no report of the real estate situation.
– Papatheodorou (2004) took on this subject, analysing the interaction of market
and spatial forces on a beach resort model in Pattaya excluding the real estate
market.
– Gale and Botterill (2005) focussed on the changing use of buildings and
infrastructure in Rhyl, North Wales but did not focus on real estate
development.

237
Markus R. Schuckert, Philipp E. Boksberger

It can be summarised that a number of research on the TALC model is linked with
factors such as land-use, spatial planning, and growth of infrastructure but at the
same time missed out to include the real estate situation into their work. Thus, this
paper tackles a long sustaining research gap by focussing consequently on the de-
velopment of the real estate in relation to the development of destinations.

Real estate development is closely associated with the socio-cultural structure and
organised around the needs of the economy in terms of workforce’s education, lo-
cation and condition (Engelhardt/Poterba 1991; Allen et al. 2004). The role of real
estate, therefore, is well established in national economies and dominantly studied
under the two perspectives of public planning (Han 2005) and individual invest-
ments (Quigley 2006; Maennig/Dust 2007). In accordance, studies on real estate
development employed various approaches that can be grouped in four comprehen-
sive models (Healey 1991):
– Equilibrium Models: Adopted from the neo-classical tradition in economics,
these models assume that development activities are structured by economic
signals about effective demand, as reflected in rents, capital values, investments
rates, etc.
– Event Sequence Models: Events in this heterogeneous development process
comprise actions, decisions, agreements and contracts by real estate
management.
– Agency Models: These models focus on actors in the development process and
their relationships from a behavioural or institutional point of view.
– Structure Models: Grounded in the urban political economy, these models focus
on the forces which set up the organization or hierarchy of the development
process and which drive dynamics.

In regards to the real estate development in tourism regions, this study is based on
the Equilibrium Model with the mention that – similar to tourism destinations – real
estate development is cyclic (Renaud 1997; Mueller 2002). Comparing to the
TALC model, the applied real estate market value cycle model (PWC 1999) con-
sists of four stages.

238
 Development of destinations and real estate in a tourism region

Balanced Value Line

Recession Recovery Expansion Contraction

Supply Declining, nil Minor Beginning to Increasing greater

increase than demand
Demand Declining Beginning to Strong, greater Positive, but slowing
increase than new supply
Rents Falling No growth Positive growth Positive growth but
slowing
Value Incomes declining Incomes Incomes Incomes stable or
Impacts with increasing cap improving with improving with declining with stable
rents high cap rents decreasing cap or increasing cap
rents rents

Figure 1: Real estate market value cycle model (adapted from PWC 1999)

There are a number of scattered observations and longitudinal studies on real estate
development in general (Han 1998) and few research designs in the context of tour-
ism in particular (Manente/Scaramuzzi 2001). These studies proved a positive rela-
tionship between housing prices and demand (Mankiw/Weil 1989; Poterba 1991).
It is therefore the purpose of this paper to explore the variations in real estates rents
along the life cycle of Grison’s destinations. As figure 1 shows each stage in the
real estate market value cycle has a predetermined set of decision rules and rents
have been considered to be a valid indicator for real estate development (PWC
1999). Two hypotheses are postulated for testing:
– Hypothesis 1: Real estate development is more active in tourism destinations
than in non tourism destinations.
– Hypothesis 2: Real estate development is determined by the development of the
particular destination.

3 Data analysis and methodological approach

For an empirical identification of the development of the real estate within the spa-
tial context of destinations, an ideal set of data should have the subsequent charac-
teristics:
– Tourism statistics should provide longitudinal data on relevant figures such as
tourist arrivals and overnight stays in the various destinations.
– Real estate statistics should report real estate prices, number of units and rent
level continuously over a longer period of time.
– All data should be available at the lowest disaggregated level possible and
include sufficient numerous and heterogeneous cases to allow the identification
and distinction of self-contained and coherent destinations.

239
Markus R. Schuckert, Philipp E. Boksberger

Even though the data used in this paper does not fulfill all the above mentioned re-
quirements and, therefore, reveals a number of limitations, the chosen Alpine re-
gion is a suitable case study for preliminary results in a nearly neglected area of re-
search. Grisons has a long standing history of tourism and tourism data have been
recorded since the 19th century though real non-deficient figures on overnight stays
are available since 1961. Thus the tourism area life cycles of Grisons’ destinations
between 1970 and 2000 can be plotted subsequently. For the same time period spot
sample real estate data for the years 1970, 1980, 1990 and 2000 were available and
can be stored in these life cycles. While continuous statistics for the real estate
market in order to display the dynamics of real estate development are lacking, the
available and selective data point out the number of accommodation units and rent
levels in Grisons’ destinations. Here, all available rentable accommodation units
were taken into consideration. These rent levels are based on a monthly average,
excluding costs for water supply, energy and heating/air-conditioning as well as
costs for a garage. In order to fulfill the third requirements discussed above the data
computed in this paper is recorded on the base of local communities. Since 1970
the total number and spatial extent of Grisons’ communities has only shifted insig-
nificantly. Grison actually consists of 207 local communities of which 57 have to
be considered as high density tourism areas. To guarantee the requested heteroge-
neity the city of Chur (regional capital with low tourism density) and the village of
Vals (moderate tourism density based on a single attraction) has been chosen be-
sides the top six tourism destinations of Grisons: Davos, St. Moritz, Arosa, Flims-
Laax, Scoul-Samnaun and Lenzerheide-Valbella. For testing the stated hypotheses
and to gain preliminary results only descriptive analyses were conducted with the
relevant data from the Swiss Federal Statistical Office.

4 Preliminary results and conclusions

With respect to the point that the overnights represent the amount of ’destination
product’ being purchased the overnight stays were used as substitute for the devel-
opment of destinations and applied to map the destinations development patterns.
figure 2 shows the development of overnight stays in selected destinations from
1970 to 2000 for the example of Grison. Notably, these life cycle patterns can be
observed for all destinations in Grison as well as for the summer or winter season
respectively.

240
 Development of destinations and real estate in a tourism region

1'600'000

1'400'000

1'200'000

1'000'000

800'000

600'000

400'000

200'000

Arosa Chur Davos Flims-Laax Lenzerheide-Valbella St. Moritz Scoul-Samnaun Vals Year

Figure 2: Overnight stays of selected destinations in Grison 1970 to 2000

The first pattern proves a tendency of decline in overnight stays for Davos, Arosa
and Flims-Laax. A second group of destinations such as St. Moritz, Lenzerheide-
Valbella, Chur and Vals have entered some sort of stagnation stage and its over-
night stays remain more or less constantly. Revealed by a rise of overnight stays it
is Scoul-Samnaun that can be considered as a still developing destination.

Presenting the development of overnight stays in figure 2 the question remains how
the development of real estate in related to the development of these destinations.
Thus figure 3 highlights the number of accommodation units and rent levels in the
respective destinations for the years 1970, 1980, 1990 and 2000.

241
Markus R. Schuckert, Philipp E. Boksberger

Davos St. Moritz

1800 4500 1600 4000
No. of Units

No. of Units

Rent (in CHF)

Rent (in CHF)
1600 4000 1400 3500
1400 3500
1200 3000
1200 3000
1000 2500
1000 2500
800 2000
800 2000
600 1500
600 1500
400 1000 400 1000

200 500 200 500

0 0 0 0
1970 1980 1990 2000 Year 1970 1980 1990 2000 Year

0-999 1000-1499 1500-1999 2000+ Av. Cap Rent 0-999 1000-1499 1500-1999 2000+ Av. Cap Rent

Arosa Flims-Laax
400 4000

No. of Units
450 4500
No. of Units

Rent (in CHF)

Rent (in CHF)
400 4000 350 3500

350 3500 300 3000

300 3000 250 2500
250 2500
200 2000
200 2000
150 1500
150 1500
100 1000 100 1000

50 500 50 500
0 0 0 0
1970 1980 1990 2000 Year 1970 1980 1990 2000 Year

0-999 1000-1499 1500-1999 2000+ Av. Cap Rent 0-999 1000-1499 1500-1999 2000+ Av. Cap Rent

Scuol-Samnaun Lenzerheide-Valbella
120 3000 300 3000
No. of Units
No. of Units

Rent (in CHF)

Rent (in CHF)

100 2500 250 2500

80 2000 200 2000

60 1500 150 1500

40 1000 100 1000

20 500 50 500

0 0 0 0
1970 1980 1990 2000 Year 1970 1980 1990 2000 Year

0-999 1000-1499 1500-1999 2000+ Av. Cap Rent 0-999 1000-1499 1500-1999 2000+ Av. Cap Rent

Chur Vals
200 2000
No. of Units

9000 4500
No. of Units

Rent (in CHF)

180 1800
Rent (in CHF)

8000 4000
160 1600
7000 3500
140 1400
6000 3000
120 1200
5000 2500
100 1000
4000 2000
80 800
3000 1500
60 600
2000 1000 40 400
1000 500 20 200
0 0 0 0
1970 1980 1990 2000 Year 1970 1980 1990 2000 Year
0-999 1000-1499 1500-1999 2000+ Av. Cap Rent 0-999 1000-1499 1500-1999 2000+ Av. Cap Rent

Figure 3: Real estate market of selected destinations in Grison 1970, 1980, 1990 and 2000

242
 Development of destinations and real estate in a tourism region

Figure 3 identifies the number of accommodation units grouped along four rental
levels measured in Swiss Francs (CHF ≤900.-; CHF 1,000-1,499.-; CHF 1,500-
1,999.-; CHF ≥2,000.-) and the average inflation-adjusted cap rents for the respect-
ive destinations.

Since hypothesis 1 predicted differences in the real estate development of tourism

and non tourism destinations, the top six tourism destinations Davos, St. Moritz,
Arosa, Flims-Laax, Scoul-Samnaun, Lenzerheide-Valbella were analysed against
Chur and Vals. A comparison of accommodations unites and rent level was con-
ducted and a significant difference for the destination Vals was reported. Contrary
to these findings, the situation in Chur indicates no significant differences. This
might be explained by the unique characteristics of Chur as regional capital and the
comparatively high number of inhabitants. On the whole, not only the accommoda-
tion units but also the rent level were computed differently and, therefore, hypothe-
sis 1 cannot be rejected. Next, hypothesis 2 was tested, this being that the real estate
development is determined by the development of the particular destination. The
computed analysis suggested that hypothesis 2 is not supported by the sample data.
On the contrary figure 3 reveals a nearly identical real estate development pattern
for all selected destinations in Grison. As a matter of fact, it can be observed that in
1970 and 1980 the real estate market was focusing on accommodation units in the
high price segment with an average cap rent around CHF 3,700.- for Arosa or St.
Moritz as examples. With the Swiss Federal Law on Acquisition of Real Estate by
Persons Resident Abroad (k. a. “Lex Koller”), which came into force on January 1,
1985, the real estate market changed massively. Beside average cap rents collapse
more than 100%, smaller and therefore cheaper real estate was developed as high-
lighted in Figure 3 for the years 1990 and 2000. Hence hypothesis 2 has to be re-
jected. In summary, the results prove that tourism affects the real estate develop-
ment in destinations to a certain extent. At the same time, the findings suggested
that in addition to tourism activities various external factors not only influencing
but also forming the development of the real estate market in destinations.

As with most research efforts, the preliminary results reported in this paper are not
without its limitations. However, the findings suggest a number of useful research
directions which can be further explored. As a starting point, future research should
concentrate on longitudinal data of the real estate market instead of a spot sample.
Moreover, to further investigate the application of TALC on real estate markets
cluster and regression analysis should be conducted which aims to clear the devel-
opment of the real estate in relation to the development of destinations. Eventually
the relation and different dynamics between destinations can be displayed in the
context of the real estate market in tourism and non-tourism areas as suggested by
Butler in 1980.

243
Markus R. Schuckert, Philipp E. Boksberger

The combination of TALC and real estate market value cycle model (see figure 1)
is primarily a risk management tool for community developers, long-term inves-
tors, lenders and tenants, asset managers, and service providers. During all life cy-
cle stages rent levels, inflation and vacancy rates can be forecasted with the inten-
tion that landlords and tenants can lease terms, asset managers can sell or buy
properties, or service providers can offer different products and services to the real
estate industry.

Although the research is spread over a limited data set, the case study may set the
agenda for future research. First, how accommodation units and rent levels are af-
fected in the different stages of TALC? And besides the market for tourism real es-
tate and the implications for destination management, what are the implications for
domestic inhabitants and tourism employees at tourism destinations? Second, how
the real estate market deals with the situation of declining destinations, when real
estate resources are converted into second homes? Third, how rejuvenation activi-
ties can take place among traditional destinations while rent levels remains rela-
tively high? Last but not least, how much property is held for speculation reasons
and for investment strategy without any use for tourism at these destinations?

244
 Development of destinations and real estate in a tourism region

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247
 Image, truth and illusion in tourism promotion:
The problem of the rapid spread of second homes in
Switzerland and planning strategies

Jürg Stettler & Giovanni Danielli

Abstract
Tourists in Switzerland want an intact and traditional village’s appearance and
natural landscape. The tourism industry mostly attracts visitors with beautiful pic-
tures, which correspond with the ideal imagination of these guests. However, the
reality is characterized by the decreasing attraction of villages’ appearance and the
landscapes because of the increasing number of second homes. The main objective
of this article is to demonstrate by example the decreasing quality of villages’ ap-
pearances and landscapes in tourism destinations, based on case studies and the at-
tempts of tourism promotion to conceal the in places dramatic change. The result of
the analysis is that the expansion of the building area should be strictly limited.
Furthermore, there is a need for regulations to cover appearance in the development
planning. The protection of the surrounding area was in all four analysed case stud-
ies an important issue. Guidance of developments in second homes and their use
should be supported using several instruments.

1 Introduction
1.1 Starting position
The Bernese tourism Professor Jost Krippendorf wrote 20 years ago in the fourth
edition of his bestseller “Die Landschaftsfresser” the following: “… how many
times will I be asked to write or talk about tourism landscape eaters? Is it not fright-
ening that this subject is a long-running issue, even more that it is in several tour-
ism destinations more relevant than ever? And despite the fact that people have
talked about it for a decade, published books, run congresses and round-table-talks,
and given political statements. And although the correlations should have been
clear for everybody. And although there are hardly any researches gaps and people
know exactly what should be done in order to stop it.”

249
Jürg Stettler, Giovanni Danielli

Two decades after Krippendorf’s statement, neither development planning nor

other instruments have been able to manage the explained development. Especially
the attractive holiday resorts are preferred locations for second homes. As a result
of strong demand, there are more second home beds in Switzerland than hotel beds
(about 1 million second home beds, about 250,000 hotel beds). Figure 1 shows
clearly the factors in the building of second homes and their correlation.

The overdevelopment caused by the building of second homes leads to an ever

greater supply network in tourism destinations. In peak times, the need for water,
the volume of waste, and the traffic frequencies are disproportionately bigger com-
pared with the low season. The subsequent costs of inadequate overdevelopment
are high. The problem of excessive development of tourism resorts, especially in
the second homes sector, has become more important in the public mind in Swit-
zerland in the last few years.

Burdening of the community

Increasing number of inhabi- budget by investments Strengthening of the commu-
tants and jobs
nity budget by tax payments

Extension of tourism Increasing number of jobs in

infrastructure industry and services Improvements in the
infrastructure

Spoiling of the housing

Second homes
scheme and landscape
Increasing prices for building
land
Increasing competition for the
hotel industry Ousting of the resident popu-
lation from the housing mar-
ket
Increasing emissions by sea- Increasing prices for buying
sonal traffic and renting apartments

Rise in social tension Too many non-residents

Figure 1: Correlations in the building of second homes

Source: Schweizerische Vereinigung für Landesplanung 1993

The overdevelopment in the destinations also runs counter to the expectations of

most visitors related to a village’s appearance and the landscape. Tourists want in-
tact and at least partially traditional village appearances and natural landscapes. The
tourism industry mostly attracts visitors with marvellous pictures, which corre-
spond with their ideal expectations.

250
 Image, truth and illusion in tourism promotion

But the reality is characterized by an increasing loss of attractiveness of village ap-

pearances and landscapes due to the changes brought about by the building of sec-
ond homes. This article shows the discrepancy between appearance and reality and
also the corresponding suggested solutions.

2 Objectives and methodology

The main objective of this article is to demonstrate by example the decreasing qual-
ity of village appearances and landscape based on case studies and the attempts of
tourism promotion to conceal the partially dramatic change. The Swiss Federal Sta-
tistical Office ascertained in the year 2000 a community typology with 22 classes1.
This typology consists of two different types of communities. On the one hand
tourism communities and on the other hand half-tourism communities. Tourism
communities are the big tourism destinations in Switzerland. The half-tourism
communities are, as a rule, small villages which are mostly characterized by agri-
culture and small industry and trade enterprises.

For this examination we selected two big internationally well-known tourism desti-
nations (St. Moritz and Zermatt) and two small half-tourism communities (Guarda
and Bellwald). The four cases were selected from the perspective of the building of
second homes and the resulting aesthetic consequences, two of them as best cases
and two of them as worst cases. St. Moritz and Guarda are situated in the canton of
Grisons, Zermatt and Bellwald in the canton of Valais. The four destinations are
characterized in figure 2.

Destinations Best case Worst case

Small destinati- Guarda Bellwald
ons - 200 inhabitants (2007) - 430 inhabitants (2007)
- 500 tourism beds - 5,000 tourism beds
- Overnight stays: 33,000 - Overnight stays: 250,000
- Share of second homes <20% - Share of second homes 85%
- Development of the share of second - Development of the share of second
homes 2000 to 2006: < 5% homes 2000 to 2006: < 10%
Big destinations Zermatt St. Moritz
- 5,650 inhabitants (2007) - 5,120 inhabitants (2007)
- 7,000 tourism beds - 13,200 tourism beds
- Overnight stays: 2,000,000 - Overnight stays: 1,200,000
- Share of second homes 45% - Share of second homes 56%
- Development of the share of second - Development of the share of second
homes 2000 to 2006: ca. 15% homes 2000 to 2006: ca. 14%

Figure 2: Selection of destinations

Source: own representation

___________________
1
http://www.bfs.admin.ch/bfs/portal/de/index/regionen/11/geo/raeumliche_typologien/01.html

251
Jürg Stettler, Giovanni Danielli

Based on the above-mentioned community typology of the Swiss Federal Statistical

Office, the number of communities with a negatively changed village appearance
and communities with a positively changed influence can be estimated roughly.

Destinations Intact and traditional Considerable changes in village

village appearance appearance
Small destinations ca. 75% ca. 25%
Big destinations ca. 50% ca. 50%

Figure 3: Estimation of shares of village appearance by type of destination across

Source: own estimations

2.1 Visitors’ expectations

From the visitor’s point of view the changes in village appearance and landscapes
caused by the booming development in second homes do not have a role to be un-
derestimated. Visitors are sometimes very sensitive to changes in the aesthetic as-
pect of the landscape and environment, a fact which is documented by several stud-
ies (e.g. TUI 1993). In a survey in Gstaad-Saanenland (Bernese Oberland), for ex-
ample, 97% of the winter visitors and 98% of the summer visitors described the
landscape as very important for their visit to the destination, followed by the friend-
liness of the inhabitants, the peace and quiet in the village, and the village’s appear-
ance (Müller 2003).

Visitors also have preferences for a village’s appearance, although idyllic pictures
are to the fore (Schweizerisches Tourismuskonzept 1979). About 65% of Swiss
households chose a more traditional village type as their desired destination (figure
4, pictures 2 and 3). According to Swoboda (1995), the value of experience of the
landscape has become a main criterion. The ideal leisure landscape should be con-
stituted according to the following aspects:
– Pleasant and/or particularly impressive appearance
– Original, distinctive character of landscape in its entirety
– Natural and/or cultural attractions
– Special incentive to stay and many opportunities for outdoor exercise and
recreation
– Healthy environmental conditions, intact supply and waste-disposal
infrastructure
– Good provision of transport, accommodation, catering, recreation and leisure
facilities.
– Inviting and well-kept village appearance, with characteristic aspects of the
local culture
– Inconspicuousness or restraint concerning extensive non-tourist infrastructure
or other forms of economic exploitation

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 Image, truth and illusion in tourism promotion

Figure 4: Order of preference of the Swiss population

Source: Schweizerisches Tourismuskonzept 1979

2.2 Previous development and guidance strategies

Figure 5 shows the considerable increase in the number of beds in second homes
and the slight decline in the number of hotel beds between 1988 and 2003. In Swit-
zerland in most destinations, there are significantly more beds in second homes
than in hotels.

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Jürg Stettler, Giovanni Danielli

Accommodation Number of beds

1988 1997 2006
Second homes ca. 700,000 ca. 850,000 ca. 1,000,000
Hotels 272,200 261,100 241,000

Figure 5: Development of the beds in second homes and in hotels between 1988 and 2006
Source: STV (2007); BFS. Verlag Neue Zürcher Zeitung (2007); Krippendorf (1986)

Currently, 11.8% of all apartments in Switzerland are used as second homes, but in
some regions in the tourism cantons of Valais, Grisons and Bernese Oberland the
share of second homes reaches 80%. A further increase in the number of second
homes would endanger the landscape and village appearances, which are the most
important assets of tourism in alpine regions.

40.0%

35.0%

30.0%

25.0%

20.0%

15.0%
Switzerland = 11.8%

10.0%

5.0%

0.0%
SO
SH

BS
TG

GE

OW
BL

SG

FR
AG
ZH

NE
JU

ZG
BE

SZ

AR

UR
NW

GL
LU

VD

TI
GR
AI

VS

Figure 6: Shares of second homes in Swiss cantons in 2000

Source: ARE (2007)

The communities of Campello TI (93.5%), Bellwald (85%), Laax GR (81%), Sil-

vaplana (78%) Vaz/Obervaz und Leukerbad (73%) and Flims (67%) have very high
shares of second homes. Zermatt (45%) has a comparatively rather low share. Fig-
ure 7 clearly shows the boom in the market for second homes in the most important
tourism destinations.

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 Image, truth and illusion in tourism promotion

40% Growth of second homes 2000-2006

Meiringen Davos
Lauterbrunnen-Wengen-
30% Mürren

Maloja
Grindelwald Saas Fee Celerina/Schlarigna
Klosters-Serneus
20% Samnaun
Zermatt Lenk Flims
St. Moritz
Kandersteg Hasliberg
Gstaad Crans-Montana Lenzerheide/Valbella
10% Swiss tourism municipalities
Pontresina Arosa
Sigriswil Val d'Anniviers
Scuol Villars-Gryon Verbier
Interlaken . Laax
Leukerbad
0%

Swiss tourism municipalities

Engelberg

Adelboden
Sils im Engadin/Segl
-10% Tourism Destinations Switzerland
Tourism Destinations BE-Oberland Leysin

-20% Share of second homes

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Figure 7: Growth of second homes in the most important Swiss tourism destinations between
2000 and 2006
Source: Wirtschaftsforum Graubünden 2006

The preservation and guidance of the development of the villages’ appearances and
landscape is, as a rule, carried out with development planning instruments on the
three levels of the federal government, the cantons und the communities (figure 8).
Given Switzerland’s federal structures, there are significant differences with regard
to the implementation of the instruments. Basically, there are three main instru-
ments for guiding the establishment of second homes in Switzerland, namely plan-
ning instruments, tax instruments and interventions in private rights.

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Jürg Stettler, Giovanni Danielli

Federal Sectoral strategies and concepts: these lay down basic principles in the fields of sports,
government leisure, tourism, nature and landscape, development planning, etc.
Cantons Cantonal structure plans: these limit settlement at a regional level, expand the cultural
landscape, extend conservation areas, and mark out recreation areas.
Cantonal conservation areas, conservation orders: protection of particularly valuable
landscapes, e.g. implementation of the Federal Inventories of Landscapes and of Natural
Monuments of National Importance (BLN)
Communities Municipal structure plans: these establish and organize building zones, agricultural
zones, conservation areas; the shaping of the green belts and the creation of recreation
areas in the neighbourhood of settlements.
Local plans: for settlement and landscape with the purpose of increasing the value of an
area.
Building permits: the planning policy of the next authority above gives the framework for
single building projects.

Figure 8: Instruments for guiding the establishment of second homes

Source: own representation

3 Case studies about the promotion and reality of second homes

3.1 Small destinations
3.1.1 Guarda
3.1.1.1 Starting position
The small Engadine mountain village of Guarda is located on a south-facing slope
on a natural terrace at 1,600 meters above sea level (figure 9). The village has an
original structure in the form of the typical Engadine house. In the ISOS-inventory2
the village’s appearance is classified as of national importance. The village consists
of traditional Engadine houses. Guarda has become a well known tourist resort for
nature tourists, especially from Switzerland, with several middle-market hotels.

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2
www.isos.ch

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 Image, truth and illusion in tourism promotion

Figure 9: Guarda is an ideal destination for Swiss tourists from an aesthetic perspective
Source: own photo

3.1.1.2 Tourism promotion and reality

Promotion and reality in Guarda are almost the same. The intact village’s appear-
ance in the traditional cultural landscape is very similar to the most popular village
type of the Swiss tourists in accordance with figure 4.

3.1.1.3 Problems
The clear visibility of the sloping site and the closed village’s appearance make
Guarda very sensitive to changes in its buildings. Due to the relatively strong hotel
sector and the small number of second homes, Guarda has no significant problems.

3.1.1.4 Solutions
Guarda has a very strictly limited building area with tight construction regulations.
Below the village there is an extended area where it is absolutely forbidden to build
houses and above the village, there is a wintersport zone. The free zone guarantees
an integrated village appearance in the long term (figure 9). Besides the zone plan,
there is a general profile plan, which protects details like colours of the buildings,
attractive wall paintings and traditional cowsheds.

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Jürg Stettler, Giovanni Danielli

3.1.2 Bellwald
3.1.2.1 Starting position
The community lies above Fiesch in Goms on a sloping site at about 1,600 meters
above sea level. The three old village centres still consist of original Valais build-
ings. The hamlet of Bodma is in the Federal Inventory of Switzerland’s Valuable
Sites of Local Character (ISOS) classified as a village with an appearance of na-
tional importance.

The village centre of Bellwald is characterized by traditional Valais buildings. The

traditional building of houses was practised until about 19503. Valais houses are
block built with squared-timber on a dry stone basis. Bellwald is a preferred holi-
day resort for nature tourists from Switzerland.

3.1.2.2 Tourism promotion and reality

The promotion of Bellwald promises a small mountain village. In reality, there are
three hamlets which are far apart, Bellwald Dorf, Bodma and Weiler, with an al-
ready begun widespread overdevelopment of the landscape with holiday and sec-
ond homes

3.1.2.3 Problems
In the past, Bellwald marked out large construction zones. Due to this process, the
community’s scope for guiding the development of house building is significantly
limited. The result of this limitation is a very high share of second homes of about
85% (967 second homes and only 169 homes for residents). As a conse-quence,
there is a huge difference between the peak and basic demand for tourism services,
as well as in the public supply of electricity and water. This leads to insufficient ca-
pacity utilization. In addition, there is a risk of further overdevelopment. The input
into the local economy generated by second homes remains relatively modest.
3.1.2.4 Solutions
As an immediate measure, in September 2007 the community of Bellwald created a
planning zone over the entire construction area for a maximum of two years. Dur-
ing this period, nothing can be done in Bellwald which might restrict landuse plan-
ning. Within this time, the local council of Bellwald is striving to issue an order to
limit the building of second homes (Figure 10).

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 Image, truth and illusion in tourism promotion

of the mountain rail-

6. Strengthening of the
4. Financial leeway of

5. Capacity utilization
traditional cultural
1. Development of

7. Management of
the community
3. Need for basic

second homes
2. Care of the
settlement

landscape

supply

hotels
way
Measures to regulate spatial development
Contingency + +
Concentration of land use + +
Rezoning of building land +
Measures to improve finances
Taxes related to cost generation +
Charges + +
Special taxes + +
Paying compensation +
+
for 2nd homes
Reduction of water consumption + +
Measures to strengthen the tourism location
Capacity-utilization of +
+
second homes
Commercial suppliers – – + +
Hotel zones +
Legend: + Positive effect on the fulfilment of the – Negative effect on the fulfilment of
criterion the criterion

Figure 10: Mix of instruments for Bellwald

Source: Hochschule Luzern 2008

3.2 Big destinations

3.2.1 Zermatt
3.2.1.1 Starting position
Zermatt is a world-famous tourism destination at the bottom of the Matterhorn. In
the centre of Zermatt you can see Valais houses (compare description of Bellwald)
in several locations. Despite this, the village appearance of Zermatt has only re-
gional importance in the ISOS-inventory. However, the surroundings are part of the
BLN 1707 Dent Blanche-Matterhorn-Monte Rosa4.

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3.2.1.2 Tourism promotion and reality

Zermatt shows in its promotion its intact Valais houses with the world-famous Mat-
terhorn. In the recent history of the development of Zermatt, more and more
"pseudo-Valais houses" have been built, which appear to be over-dimensioned and
exaggerated. Furthermore, the construction area has been greatly extended in the
last 30 years, so that almost the entire area of the valley floor has been used. But
there are still huge reserves of building land. Nevertheless, the village’s appearance
with the Matterhorn behind has been preserved in extensive parts.

3.2.1.3 Problems
Zermatt has experienced enormous development since 1960. The original Valais
house was the model for new buildings. Despite the relatively strong aesthetic regu-
lations, larger areas have been built over with houses of inadequate aesthetic qual-
ity. Disturbing are the size of the houses, as well as the, for the area, unusual dis-
tance between the houses.

For a long time, there has been a huge demand for second homes. Between 1992
and 2007 alone, more than 1,300 houses were built. Today, the share of second
homes is about 45%. This is a rather low share for a bigger Swiss tourism destina-
tion. The land prices have gone up to between 7,000 and 15,000 CHF. The shortage
of building land and the high land prices have led to a driving out of the locals from
the land market.

3.2.1.4 Solutions
One of the most important measures is, besides the rigorous aesthetic requirements
in the building regulations, the protection of the local population on the housing
market. In 2005 the canton of Valais approved a framework of rules about the con-
struction of homes for residents and second homes in the community of Zermatt.
What follows is an extract from the rules of the community5.

Art. 1 Purpose
These rules have as their object the promotion of the building of homes for resi-
dents and the reduction of the building of second homes by laying-down ratios for
homes for residents.

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 Image, truth and illusion in tourism promotion

Art. 3 Definitions
Homes for residents are regarded as apartments which are used by people who live
permanently in the community of Zermatt. Treated as equal with homes for resi-
dents are apartments which are inhabited by people who live for their pursuit of
their career or for school temporarily in the community, and have the required resi-
dence permit. All other apartments are regarded as second homes.

Art. 4 First home share

If new apartments are built, existing apartments extended, or a building is newly
used as an apartment, at least 30% of the newly created gross floor-space area has
to be used exclusively as homes for residents. In buildings with one apartment, the
entire living space has to be used as a first home.

The share of homes for residents has to have in any case at least one apartment with
a gross floor-space area of 80 square meters, provided that more than one apartment
is built.

3.3.1 St. Moritz

3.3.1.1 Starting position

In the world famous St. Moritz, which was originally a hamlet consisting of Engad-
ine houses, today the Engadine house can be found only in isolated cases, e.g. in
the centre of St. Moritz. St. Moritz is part of the Federal Inventory of Landscapes
and Natural Monuments of National Importance (BLN) 1908 Oberengadine Lake-
land-scape and the Bernina mountain cluster6.

3.3.1.2 Tourism promotion and reality

In the promotion “Top of the World”, St. Moritz presents the illusion of a relatively
homogeneous village appearance. In reality larger areas of St. Moritz have become
urbanized with houses of a partially questionable aesthetic value as far as their inte-
gration in the sensitive high-level Engadine valley is concerned. However, the huge
hotels are an architectural peculiarity.

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Parts of the villages seem like agglomeration communities as are found round the
cities of the Swiss central belt. Especially, in the area of St. Moritz Bad high-rise
buildings spoil the Lakeland area of the Oberengadine (figure 11). Everybody who
is looking for an Engadine village will be very disappointed.

3.3.1.3 Problems
St. Moritz is part of the agglomeration of the Oberengadine, where about 110,000
people live during the peak season that work in the valley or are on holidays. Due
to this number of inhabitants, the Oberengadine is the sixth largest city in Switzer-
land, and, therefore, the federal government recognized the Oberengadine after the
national census 2000 as an agglomeration7.

There are more than 16,000 second homes in the Oberengadine. The growth rate in
the Oberengadine has been very high in the last few years. On average 400 apart-
ments have been built every year, about 100 of them in St. Moritz. Most of the new
apartments were owner-occupied apartments, of which the majority are used as sec-
ond homes. As a consequence, St. Moritz has recorded a marked urbanization of
the landscape.

Figure 11: Building of second homes in St. Moritz

Source: own photo

___________________
7
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 Image, truth and illusion in tourism promotion

3.3.1.4 Solutions
3.3.1.4.1 Quotas, shares, allotments, allocations
In a plebiscite in 2004 the population voted clearly for a quota for second homes in
the Oberengadine. Three years later this had failed because of a disagreement be-
tween the communities. In St. Moritz there is already a quota order and the building
of homes for residents is supported. The detailed local planning regime of
St. Moritz is extremely complex (Bundi 2007).

4 Conclusions
The following conclusions for the regional and local level can be drawn from the
analysis of the four case studies.

4.1 Regional level

At the interregional level, the detailed nature of the land use in the tourism of the
cantons is very important. The canton of Grisons is a good example of this, because
this canton developed a concept within its structure plans. Figure 6 shows that all
areas are in a different way important for tourism and that future development has
to be planned differently for the different areas.

It is particularly important to couple large-scale projects either together with urban

agglomerations or intensively used tourism areas. The other areas should be taboo
areas for large-scale projects. With such a clear regulation in the structure plans,
aesthetic aspects can be optimally taken into account.

Urban areas/agglomerations Tourism areas

Specific tourism Intensive tourism
- Recreational tourism, leisure activities - Bigger, investment- and infrastructure-intensive
- City tourism tourism offers
- Congress tourism - Optimize and integrate
- Generous and intensive recreational areas
Rural areas Nature areas
Integral, rural tourism Scattered, extensive tourism
- Develop own potentials - Protect
- Exploit evolved cultural areas and strengths - Limit recreation in some areas
sustainably - Partnership with nature and landscape
- Existing small intensive recreational areas, new
intensive recreational areas based on own devel-
opment potentials
- Partnership with region, agriculture, nature and
landscape, village appearances

Figure 12: Tourist spatial planning strategy Graubünden

Source: Richtplan Graubünden 2003

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Jürg Stettler, Giovanni Danielli

4.2 Local level

4.2.1 Building areas, time scale for construction, allocation and concentration of
land use
The analysis shows that the spread of building areas needs to be limited in order to
use land sparingly (see case study Guarda). Oversized building areas foster chaos
and urban sprawl (see case study Bellwald). It is possible for communities with far
too big building areas to downgrade some of the areas into agricultural zones or
into reserve building areas. In cases in which urban sprawl has set in early and the
landscape is already affected, a time scale for construction might be sensible (see
case studies St. Moritz und Zermatt). In places like Bellwald, a concentration of
land use must be realised for built-up areas in order to protect the character of the
village and its surroundings.

4.2.2 Aesthetic provisions in local building regulations

Especially in places with valuable townscapes and settlement structures, distur-
bances need to be avoided beforehand (see case study Guarda). However, it might
also be worthwhile to correct unfavourable developments in the mid or long-term.
This might be realised in a local plan which pays special attention to valuable struc-
tures.

4.2.3 Protection of the surroundings

The protection of the surrounding areas plays a key role in all of the case studies
above. The townscapes of places such as Guarda, Bellwald and Zermatt gain im-
portance if their surroundings are kept clear of bothersome objects. In the case of
St. Moritz, the preservation of the Oberengadine landscape is also of key impor-
tance. Successful protection of the surrounding areas may be achieved by overlap-
ping zones, or overlaid utilisation (see case study Guarda). In the case of Bellwald,
the protection of the surroundings is endangered by the possible reutilisation of all
the existing buildings outside the building areas.

4.2.4 Infrastructure development

With infrastructure development plans and a strict limitation of the land use in the
zonal plan, compact urban development can be achieved. In consequence, the costs
for infrastructure development will be low.

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 Image, truth and illusion in tourism promotion

4.2.5 Controlled development of second homes

The construction of second homes can be controlled or reduced to certain areas
(e.g. the core zone) by a differentiation of the zones. For the construction or the
conservation of hotels, there is the possibility of defining a hotel zone. Within hotel
zones, the conversion to second homes is prohibited. Furthermore, “zones for local
inhabitants” may be created, or minimum shares of first homes may be defined. A
very effective measure against excessive construction of second homes is a quota
limitation of building permits.

Additional instruments for controlled development are: real estate taxes according
to the polluter-pays principle for non-resident owners, or a user-oriented financial
contribution to the infrastructure, are it as a non-recurrent payment or an annual
fee. Also viable are higher visitor’s taxes for “cold” beds, although the legal ground
is often unsound in this area. Compulsory usage or renting of apartments is another
effective means of raising the quota of “warm” beds in second homes. The latter
may be combined with various instruments.

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Jürg Stettler, Giovanni Danielli

Bibliography
ARE (2007): unpublished statistics.
BFS, Verlag Neue Zürcher Zeitung (2007): Statistisches Jahrbuch der Schweiz. Neuchâtel.
Bundesrat (1997): Landschaftskonzept Schweiz. Bern.
Bundi E. (2007): Raum Graubünden. Dokumentation Raumplanung und Raumentwicklung.
Chur/Glarus/Zürich.
Ecoplan (2000): Siedlungsentwicklung und Infrastrukturkosten. Schlussbericht. Bern.
Hochschule Luzern (2008): Gutachten zur Regelung des Zweitwohnungsbaus in Bellwald
(nicht veröffentlicht).
Job H.,Vogt L. (2004): Freizeit/Tourismus und Umwelt, in: C. Becker u.a.. Geographie der
Freizeit und des Tourismus. München.
Krippendorf J. (1986): Die Landschaftsfresser. Tourismus und Erholungslandschaft – Verderben
oder Segen? 4. Auflage. Bern.
Krippendorf J. (1986): Alpsegen Alptraum. Für eine Tourismus-Entwicklung im Einklang mit
Mensch und Natur. Bern.
Könz I. U. (1994): Das Engadinerhaus (Schweizer Heimatbücher 191), Bern.
Müller H. R. (2003) Tourismus und Ökologie. Wechselwirkungen und Handlungsfelder.
München. Wien.
Richtplan des Kantons Graubünden (2002): Chur. http://www.richtplan.gr.ch/
Schweizer Tourismuskonzept (1979). Bern.
Schweizerische Vereinigung für Landesplanung (1993): Die Beschränkung des
Zweitwohnungsbaus. Modelle und Empfehlungen für Fremdenverkehrsorte. Schriftfolge
Nr. 59. Bern.
Stettler J.; Danielli G. (2007): Stärkung des Schweizer Tourismus durch eine Zusammenarbeit
zwischen Bund und Kantonen. In: Jahrbuch 2007. Schweizer Tourismuswirtschaft.
Universität St. Gallen.
STV (2007): Swiss Tourism in Figures. Bern.
Swoboda H. (1995): Tourismus-Landschaft-Umwelt. Institut für Tourismus und Umweltkultur.
Linz.
Wirtschaftsforum Graubünden (2006): Neue Wege in der Zweitwohnungspolitik. Chur.

266
 Section 6:
Public-Private Governance
Approaches for Managing Holiday
Property Market Development

267
 Embedding leisure facilities
in destination development –
Two case studies of
water parks in Germany

Daniel Metzler & Hubert Job

Abstract
Large leisure facilities are a special type of properties: they require continuous rein-
vestment, are very risky due to constant changes in the demand of tourists search-
ing for recreation and often impede sensible conversion measures. Based on
Leiper’s theory of ’tourist attraction systems’ this paper focuses on two case studies
of German water parks concerning the question how large leisure facilities affect
the performance and management of tourism destinations. A young destination is
compared with a mature one; also further spatial and structural conditions vary a lot
despite the fact that both examples are situated in the surroundings of Munich.
Based on visitors’ surveys the study raises the question to which extent water parks
represent tourist nuclei in the eyes of the visitors. Besides the spatial behavior of
tourists it focuses on their expenses as well as their regional economic effects
within a value added study.

Keywords: Regional economics, economic impact assessment, leisure facilities,

destination development, tourist attraction system

1 Introduction
Post-modern tourists seek experiences taking them out of the daily routine in clear
time and spatial domains, making it easier to fit their tourist itinerary in their busy,
as well as highly individualized everyday flow. Hence, customer demand depends
more than ever on attractions, integrating different aspects of the value chain in a
single location. Ideal representations of solitary attraction destinations are leisure
facilities, especially water parks. Formerly being leisure attraction solely, they
evolved into one-stop destinations, perfectly answering the demand depicted above.

269
Daniel Metzler, Hubert Job

Facilities in this category may reach considerable sizes, not only in terms of physi-
cal dimensions, but also concerning visitor numbers, with single facilities exceed-
ing easily one million visitors annually. Together with this new magnitude of size
and scope, novel management issues arise – both, on the side of the facility itself
and the destination management.

2 Theoretical background: Attractions within the system of leisure and

tourism
According to system theoretical characteristics of tourism, attractions are defined as
central factors determining tourism flows (Bieger/Laesser/Bischof 2003: p. 15).
De-spite of the importance of attractions within the theoretical context, their func-
tionality is debatable.

Based on literature research Lew (1987) defines three approaches towards the topic
of attractions: an ideographic, an organizational and a cognitive one. The ideo-
graphic or “formal” (Leiper 1990: p. 368) approach is widely spread and contains
general characteristics of a place, as natural uniqueness, climate and culture. The
second approach focuses on spatial and temporal organizational forms of attrac-
tions. Attractions can be classified for example concerning their geographical size,
e.g. from points (single items) to large-scale items (entire countries). In the last ap-
proach the tourist is located in the center of attention and categorizes attractions
based on the tourist’s perception and experience.

A widely spread opinion is that attractions are able to attract tourists like a magnet
according to the law of gravitation. Despite the Latin stem, which supposes attrac-
tions to have gravitational force, Leiper (1990: p. 369) generally criticizes this point
of view, which was mainly created by Gunn (1972). Opposing the approach that at-
tractions entice tourists (pull proposition), Leiper (1990: p. 371) joins MacCan-
nell’s (1976) argumentation and shares the view that tourists are not attracted, but –
solely initiated by their own motivation – move towards the attraction points (push
proposition).

By combining the approaches of both MacCannell (1976) and Gunn (1972), Leiper
creates a definition of attractions that on the one hand is compatible with system
models concerning tourism and on the other hand considers that attractions are only
constituted by the relationship to a tourist (1990: p. 371). Besides considering tour-
ists, the nucleus is an important feature of the definition. This explains the fact that
attraction systems not only consist of simple places of interest, but contain various
independent elements. The nucleus is a special feature of a place that tourists visit.
Leiper sees possible central elements in objects, but also people or events.

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 Embedding leisure facilities in destination development

The complex motivations and individual experiences forming a base for visiting an
attraction lead to a high number of potential nuclei. In seldom cases only one nu-
cleus is decisive as travel motivation; mostly a “nucleus mix” (Leiper 1990: p. 374)
determines a journey. Due to the importance of single nuclei Leiper differentiates
between three hierarchic levels: primary nuclei are nuclei that are known by the
tourist before the journey and motivate him to book the trip. This highest hierarchic
level determines the choice of destination. The tourist also has information about
attributes of secondary nuclei before beginning the journey. These are – just as the
tertiary – not relevant for the search of destination. The tertiary nuclei define char-
acteristics that were unknown before beginning the journey and are discovered du-
ring the stay (cf. Leiper 1990: p. 374).

A critical discussion is necessary concerning the question to what extent visitors

follow a given structure within an exemplary assumption of attraction systems or
can influence this structure. Considering motivation being the decisive element for
choosing a tourism destination both views can be implemented: present studies
(e.g. Pritchard/Morgan 2000) focus on the assumption that consumption in tourism
is widely characterized by social structures and allows little space for divergent be-
havior. The antithesis can be formulated analogously by identifying a differentia-
tion between consumption styles in the post modern society (e.g. Nuryanti 1996)
and conciliated with the model.

Accordingly, on the side of production the question concerning the agents needs to
be raised. Seeing as Leiper categorically excludes the possibility of a “magnetic
gravitational force” (1990: p. 369), the production of attractions is regarded sparse
attention. Leiper does not discuss the influence of operators on demand concerning
expansion and advancement of their facilities. Accordingly, Richards (2002:
p. 1062) proposes a more detailed investigation of producers of new attraction sys-
tems.

3 Built attractions in tourism: large leisure facilities – an attempt at a

definition
Leisure real estates are usually included into special properties (Kippes 2005). The
classification is justified by the fact that this type of real estate was built for a spe-
cific use and a later conversion would mostly lead to prohibitively high costs; this
increases the investment risk. Accordingly, more often than in other real estate sec-
tors these projects are financed by equity capital and bank credits without involving
institutional investors as usual.

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The part of the real estate market specialized on requirements of the leisure branch
is subject to high qualitative and quantitative variations. Due to constantly increas-
ing claims on the part of the customer the investment market differentiates more
and more – parallel to leisure activities. Additionally it can be observed that in-
vestment sums for contemporary objects are higher than for previous facilities.

Traditional relationships are still widely spread within the leisure real estate sector.
Leisure real estates mostly focus on the operator as central figure. While the project
developer has increasing importance due to his diverse influence in various parts of
the real estate industry e.g. on choice of location, authorization process, architec-
tonic design of the property, but also financing, this is not the case with leisure real
estates. The operator is significantly responsible for the property’s use. Due to the
daily consumption of leisure real estates by visitors, the attractiveness of the facility
is agreed on every day. Hence, the operator is responsible for success or failure of a
property seeing as he can keep the facility attractive within short periods and needs
adequate knowledge of the market as well as of marketing. Consequently, leisure
properties are also described as properties run by operating companies or by man-
agement (Kippes 2005: p. 71f.).

Within the professional debate mainly those facilities are respected that have a cer-
tain size. Primarily, size aims at the physical extent, e.g. built-over area. But often
also aspects like the catchment area of visitors, the number of visitors or the in-
vestment volume are taken as a basis for justifying a classification of large leisure
facilities.

Large leisure facilities are no new property type within the leisure market, but stand
for a range of characteristics that differ in their quality. The following similarities
speak for such a category:
– Risk: Large leisure facilities are risky investments, because the demand
behavior changes quicker than in other real estate markets.
– Conversion: Leisure facilities are monofunctional special properties. A
conversion is – if at all – only possible with high effort.
– Reinvestment requirement: The market for leisure facilities is characterized by
high regular investment requirements (cf. Franck/Wenzel 2001: p. 187f.).

This context raises the question which spatial types and scale levels especially ben-
efit. On the one hand it is significant that an upgrading of urban area in the context
of revitalizing inner cities, partly towards “central entertainment areas” (Heinze
2001: p. 257), has been taking place during the last years. Locations for projects are
usually former industrial, commercial or railway lands.

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On the other hand, mainly large scale leisure facilities favor city limits or even sur-
rounding lands due to lower ground rates. These locations are often seen in combi-
nation with fairs, airports or conference centers (cf. Maier/Götz 2001: p. 181). Röck
(1998: p. 124f.) points out that ground, construction and equipment costs have no
primarily decisive effect on the location. A significantly more important factor is
the ideal catchment area. Accordingly, the connection to main traffic arteries is cru-
cial for opening up to a broad potential customer base.

4 Diffusion of large leisure facilities: German water parks

Figure 1 demonstrates the distribution of water parks in Germany and their evolu-
tion phase related to spatial structure types. The latter describe areas marked off by
their population density and accessibility of centers (BBR 2005). It precisely shows
that urban agglomerations and concentrated agglomeration areas as well as their
surroundings, i.e. the proximity to centers, are favored when choosing a macro lo-
cation. Thus, also in peripheral rural areas, mostly in regions with a strong tradi-
tional tourism influence, various facilities can be found. The locations near cities
can be explained due to the high potential customer base that lives in the catchment
area. In areas with high tourism intensity however the water park is often an impor-
tant attraction for the destination which strongly focuses on the tourism market.

Furthermore the thematic map demonstrates that the expansion has not ended and
that also recently further water parks were established, especially in Eastern Ger-
many, which mainly during the 1990s registered large increases mostly in the struc-
turally weak, peripheral area supported by high financial stimulation by the Euro-
pean Union (objective I subsidies). But also the old federal states made up for the
late development in peripheral areas. In this process the revitalization of lain-back,
established health resorts due to the social legislation reform and long-time invest-
ment accumulation plays a significant spatiotemporal role.

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Figure 1: Distribution of water parks in Germany and their year of construction

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5 Empirical design
The following focuses on two examples within Munich’s near periphery for an-
swering the question whether and how two differently old water parks influence the
performance of the concerning destination as nuclei of divergent precedence.
Therefore the visitor structure, the spatial behavior of visitors, but mainly regional
economic aspects of tourism – here related to the expenses of visitors – play a sig-
nificant role for the destination management.

The economic importance of a large leisure facility can be calculated by means of a

tourism value added study. The form presented in the following focuses on the
value added created by the spending behaviour of tourists. In the case of studies for
specific facilities or regions the data is collected by means of face-to-face inter-
views in the destination – a survey of tourists in the region of origin is only sensible
when including the entire market volume. For this purpose, a total of 884 inter-
views in Erding and 586 interviews in Bad Tölz were conducted with visitors of the
respective water park. The value added derives from the amount of tourism sales.
Within a value added study first all for the amounts irrelevant for value added are
excluded for deriving the value added from the total sales (cf. Metzler 2007:
p. 55ff.).

6 Case study Therme Erding

According to the spatial structure types of the BBR (2005: p. 20) the town Erding
with its 33,000 inhabitants (BayLfStD 2006) belongs to the intermediate region
with beginning agglomeration. This area has an especially good accessibility of
centers, in this case the metropolis Munich which is located about 35 km away.
Considering the economic aspect, the center of secondary importance is strongly
influenced by the MUC airport in Erdinger Moos. Consequently, the regional plan
points out the economic stimulation effect of the airport and its infrastructure which
supposedly has the highest influence on the county and town of Erding.

Momentarily, the town is not strongly influenced by tourism – the tourism inten-
sity, measured in overnight stays per 1,000 inhabitants, amounted to 4,270 (2003).
Compared with Bavarian figures of 5,580 this is a value below average (BayLfStD
2004). However, the number of overnight stays has increased rapidly during the
last years. Within the period between 1999 and 2004 an increase of 76.4% was
achieved. There are no high seasonal differences, which are confirmed by a rela-
tively low Gini coefficient of 0.121 as measure for the distribution of overnight
stays during a year. In 2003 the duration of stay averaged 1.96 days. This indicates
the predominance of city tourists or business travelers.

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Daniel Metzler, Hubert Job

The Therme Erding is an important tourist attraction point. The encountered sulfur-
ous water is not only used for geothermal energy production, but also in the thermal
bath. This thermal bath was planed, built and financed by an architecture bureau.
End of 1994 the contract between the town of Erding and the ’Wund’ group was
signed, the thermal bath was opened in October 1999; Wund also took on the op-
eration of the thermal bath. The Therme Erding can particularly be distinguished by
its dome roof with a diameter of 56 m which can be opened in good weather. The
entire facility originally contained a surface of 9,500 sqm, divided into a thermal
and a sauna area. Meanwhile additional expansion plans have been realized by
means of further investments amounting to about 60 million EUR.

6.1 Visitor structure

The number of visitors in 2004 amounted to about 650,000. Most visitors are
counted during the winter half year, i.e. 61%. Within a week naturally on Saturdays
and Sundays there are most visitors. The visitor structure reveals a significant
dominance of day-trippers (85.1%). The second most important group are visitors
living in the vicinity (10%). Only 4.9% of all visitors are overnight guests that have
a secondary trip from their tourism destination.

Most of the interviewed overnight guests have a short duration of stay; the average
is 1.4 days and therefore is below the average of Erding. Most of the overnight
guests stay in Erding or nearby – about a quarter indicates Munich as their place of
accommodation. The commercial accommodation categories with highest percent-
ages are hotels with 28%, followed by guesthouses with 9%. Guests in non-
commercial accommodations primarily stay with friends or relatives (49.5%).
Therefore, this is the largest category of all overnight guests. A further important
guest group is people traveling with mobile homes (8%).

Of the group of visitors not staying overnight two thirds indicated that they were in
the region because of this leisure activity. Nearly 36% live in the region – these vis-
itors had an average traveling time of 24 min. The age of the interviewees in Erding
averaged about 45 years, groups consisted of an average of 1.9 people. Only every
fourth interviewee was accompanied by a child.

The preferred mean of transportation of the visitors of Therme Erding is undoubt-

edly the car: about 84% of all interviewed people indicated that they arrived by car,
13% used public transportation. The traveling time of all guests averaged almost 40
min. On average even far longer traveling times would be accepted. The guests of
Therme Erding would accept an average of almost 70 min. traveling time for a
similar water park.

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6.2 Nucleus
According to the large number of nearby living visitors and day-trippers the per-
centage of people having visited the thermal bath various times is relatively high.
On average the interviewees indicated that they have been in the thermal bath about
ten times.

Almost 17% of the interviewed visitors of the Therme Erding said they would have
been in Erding without the facility, about 3% were indecisive. A clear majority, i.e.
over 78% indicated that they would not have been in Erding without the thermal
bath (cf. figure 1). With the answers having been specified as ordinal variables, the
U test, based on comparing ranks, calculates a highly significant difference
(p<.001, U=11,907.5) between the answers of overnight guests and guests without
overnight stay. Therefore about 16% of the visitors not staying overnight would
have been in Erding anyhow; the reference value of overnight guests however
amounts to 45%. For 52.2% of the overnight guests the thermal bath is the decisive
reason for visiting the region – else they had never planned this visit.

The majority of the visitors, i.e. about two thirds, return to their home place or holi-
day resort. It can be assumed that this guest group does not undertake further activi-
ties affecting expenses besides the visit of the thermal bath. About every fourth in-
terviewee indicated that he would perform one of the following activities: restau-
rant visit, shopping/city tour or visiting an event. Further significant differences
within the spread of activities occur between day-trippers and overnight guests.
While only 24.6% of day-trippers perform one of the mentioned activities, the per-
centage increases to 51.7% with overnight guests. Accordingly, the contin-gency
coefficient demonstrates a highly significant correlation between the activity after
visiting the thermal bath and the classification between daily visitors and overnight
guests (p<.001, K=.276).

6.3 Income effects

The total income effects are calculated by adding the effects of the first and second
level of sales. This equals an amount of 3,662,982 EUR, which describes the total
effects created by all visitors of the Therme Erding. While assuming linear produc-
tion functions for the region, independent from the number of visitors, every 1,000
visitors generate income effects amounting to 5,635 EUR.

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When comparing the income effects per 1,000 visitors, it shows us that mainly ho-
tel guests are an important clientele for the regional economy. The relatively large
effects of this customer group result from their high expenses on the one hand and
the slightly higher rate of value added on the other hand.

Often similar studies, mainly for events, do not consider effects generated by local
visitors, because they expect anyhow that their money is spent in the region and the
effects would incorrectly be assigned to the attraction (e.g. Dwyer/Forsyth/Spurr
2005: p. 352; Lee/Taylor 2005: p. 596). In the present case the visitors living in the
vi-cinity create income amounting to 164,627 EUR corresponding to about 4.5% of
the total effects. 1,000 visitors of this group generate effects in the amount of 2,308
EUR.

For including the influence of travel motivation, the income effects were also cal-
culated for visitors that indicated have visited Erding solely because of the thermal
bath. In other words this means that the Therme Erding acts as a primary nucleus
for this clientele. The income effects of this group containing both daily visitors
and overnight guests amount to 823,753 EUR (22.5% of the total income effects).
On average the expenses of 1,000 visitors of this group create income amounting to
7,610 EUR. This calculation on the one hand considers the composition of this sub-
category of daily visitors, overnight guests with stay in hotels and overnight guests
with stay in other accommodations. On the other hand their specific spending be-
havior has influence on the estimation of effects, i.e. only those cases were consid-
ered that visited Erding solely for thermal reasons.

7 Case study Alpamare Bad Tölz

The town Bad Tölz with its 17,000 inhabitants is assigned to the Bavarian alpine
region. Based on the settlement structure Bad Tölz belongs to the rural sub-areas of
Bavarias planning region 17. Due to the short distance of about 50km to the center
of Munich, the center of secondary importance is part of the surroundings of the ur-
ban agglomeration.

The entire planning region, but mainly also the Tölzer Land, is a traditional tourism
region with substantial holiday tourism. Accordingly, the tourism intensity amount-
ing to 24,366 overnight stays per 1,000 inhabitants is exceedingly above the Bavar-
ian average (BayLfStD 2004). Particularly the health tourism in Bad Tölz which
has been known as an iodine health spa since 1899 and since 1969 carries the addi-
tional attribute “healing climate spas” originates the tourism tradition. Since March
2006 Bad Tölz also is recognized as moor spa.

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 Embedding leisure facilities in destination development

Like most health resorts and therapeutic spas in Germany – only coastal resorts and
seaside health resorts are excluded from this development – Bad Tölz suffers from
decreasing overnight stays due to changes in the public health management. Be-
tween 1999 and 2004 the number of overnight stays decreased by 23.7% (cf. DHV
2005) and, due to slow adaptation of capacities, levels down the occupancy rate and
therefore the profitability of the accommodation sector.

Despite the massive decrease in classical visitors of health resorts, the health tour-
ism is still the distinctive segment of regional tourism. This is also revealed by the
fact that the average duration amounts to 6.7 days. The Gini coefficient indicates a
slightly higher value (0.122) than Erding; this demonstrates higher seasonal differ-
ences characteristic for the distinctive holiday tourism. Besides this, day-trippers
from agglomeration areas, mainly Munich, are an important clientele.

The Alpamare belongs to the “Jodquellen AG” and is operated by the “Alpabob
GmbH”. The Alpamare was opened in 1970 as Germany’s first wave pool in the
central bath area of Bad Tölz. Besides health oriented facilities, the Alpamare tries
to combine the elements of American water parks with those of European thermal
baths. The Alpamare mostly became known for its temporarily largest slide area of
Europe. In 2000, the Alpamare opened the world’s first indoor surfing area.

Between 1998 and 2002 the number of visitors averaged about 398,000 per year.
The number of visitors was relatively constant within this period of five years; the
average annual decrease amounted to 1.1%. It is worth pointing out that this aver-
age was lowered by the number of visitors in 2002 which decreased by 8% com-
pared with the previous year. This negative development is justified by a chlorine
accident in May 2002 which caused a massive collapse of the number of visitors in
June (cf. Jodquellen AG 2003: p. 4). Despite the otherwise relatively constant de-
velopment within this period, the number of visitor in 2003 fell to 330,000.

7.1 Visitor structure

Overnight guests play an important role for the Alpamare: nearly 20% of the visi-
tors stay in the region. While 10% of the interviewees live within the region, 70%
of the visitors are day-trippers staying at their principal residence before and after
the visit.

The overnight guests stay in Bad Tölz and its surroundings for an average of 7 days
and therefore have a relatively long duration of stay. This high figure can be ex-
plained by Bad Tölz’s position as classical destination with dominating health tour-
ism.

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Daniel Metzler, Hubert Job

Hotel guests constitute the most important group with 39.4% of all overnight
guests, followed by guesthouses and vacation homes visited by 19% of Alpamare’s
visitors. The interviewees in Bad Tölz averaged an age of 40 years. The group size
comprised an average of 2.3 people.

The percentage of motorized individual transportation with 90% in Alpamare is

above the already high rate within leisure transportation. The rate of public trans-
portation is correspondingly low: only 3.4% of the interviewed visitors used this
possibility. However, due to the central position of the Alpamare the percentage of
pedestrians and cyclists amounting to 6% is relatively high. The averaged traveling
time of visitors is almost 51 min. On average the interviewees would accept even
longer traveling times of 89 min.

7.2 Nucleus
The percentage of interviewees visiting the Alpamare for the first time amounts to
about 44%. Correspondingly, the number of visits of the water park averages to al-
most 5.5. When asking generally whether the interviewees would be in Bad Tölz
without the Alpamare, 15.4% approve this question, 3.9% are indecisive and 80.7%
would not be in Bad Tölz without the Alpamare (cf. figure 1). The differences are
not significant (p=.921, U=207,151.5). Concerning overnight guests this difference
is significant (p=.043, U=1,717.5). 61.3% of the visitors indicate that they would be
in Bad Tölz without the Alpamare, 6.6% maybe and only 32.1% would not be
there. The Alpamare competes against other established attraction points in Bad
Tölz which makes it difficult to achieve a downright outstanding position in the
market.

Figure 2: ’Would you be here if the water park did not exist?’

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 Embedding leisure facilities in destination development

The visitors of Alpamare were also asked about further activities combined with the
visit. Nearly every third indicated that he would perform an activity affecting ex-
penses, i.e. either visiting a restaurant or an event or going shopping. The majority,
i.e. 62% of the visitors, returns to their home or meets friends or relatives. At this,
day-trippers and overnight guests show highly significant differences in Bad Tölz
(p<.001, K=.354): it is particularly noticeable that almost two third of the day-
trippers return to their home after the visit whereas only 36.3% of the overnight
guests go to their accommodation. Various overnight guests (22.5%) combine a
shopping or city tour with their visit whereas only almost 3% of day-trippers do
this.

7.3 Income effects

Calculated across all visitors, the daily expenses in Bad Tölz average 20.42 EUR.
Also in this case the variation is extremely high due to aggregating different guest
groups: the standard deviation amounts to 42.57 and differs highly significant from
normality (p<.001, W=0.500).

There are extreme differences between day-trippers and overnight guests: day-
trippers spend an average of 8.32 EUR in combination with visiting the Alpamare,
overnight guests 37.90 EUR. Correspondingly, the differences are highly signifi-
cant (p<.001, U=4,069). Regarding Alpamare’s visitors, the daily expenses of over-
night guests are numerically increased due to expenses for accommodation. How-
ever, the difference still remains highly significant when not considering these ex-
penses (p<.001, U=7,504).

For a calculation the number of visitors is decisive. The average visitor number be-
tween 1998 and 2002 serves as base for Alpamare (398,000). A further step com-
bined the empirically investigated percentages of guest groups with the total num-
ber of visitors. By adding the effects on the first and second level of sales, the in-
come effects amount to 4,131,395 EUR.

The income effects of visitors living in the vicinity were additionally calculated.
Their expenses generate income effects amounting to 128,326 EUR (3.1% of the
total income effects). 1,000 visitors living in the vicinity create income effects of
2,898 EUR. When respecting guests coming to Bad Tölz solely because of the Al-
pamare, income effects amounting to 1,846,202 EUR are generated (44.7% of all
income effects created by Alpamare’s visitors). 1,000 visitors generate income ef-
fects in the amount of 17,918 EUR.

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Daniel Metzler, Hubert Job

8 Discussion and conclusion

Both case studies demonstrate the high importance of large leisure facilities within
regional tourism systems. This is particularly obvious concerning the visitor num-
ber that is highly important for tourism activities, mainly in the case of very young
destinations like Erding. Hereinafter this importance is also confirmed due to tangi-
ble economic effects. Interestingly, the effects are slightly higher in Bad Tölz (4.1
mill. EUR) than in Erding (3.7 mill. EUR), despite the fact that absolute visitor
numbers are much higher in Erding. The comparison of the effect in relation to
visitor numbers shows this clearly: 1,000 visitors of the Therme Erding are respon-
sible for an impact 5,600 EUR, in contrast to 10,400 EUR caused by 1,000 visitors
of Alpamare, If only visitors are considered for whom the water park can be seen as
a primary nucleus the figures raise to 7,610 EUR in Erding and 17,918 EUR in Bad
Tölz.

Bad Tölz considerably benefits from two factors. First from its high share of over-
night guests, who have a higher budget available for their visit and secondly from
the location of the water park that is integrated in the central urban area, making it
easier to spend the money.

From the water park’s management point of view, capacity utilisation is of utmost
importance – without further consideration of the type of visitors. If the water park
is to be integrated in the destination management, much more emphasis has to be
laid on local and regional pooling of tourism suppliers. Otherwise – as can be seen
in both case studies – the management of the attractions consequently expand their
activities in order to incorporate more of the touristic value chain, e.g. by offering
integrated hotel capacities, leaving beside regional supply.

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 Vacation home owner’s willingness to lease through
an intermediary – A case study in two
Finnish ski resorts

Raija Komppula, Helen Reijonen & Tuomas Timonen

Abstract
The number of vacation homes is increasing especially in municipalities with well-
known ski centres in Finland. Several agents offer rental services for self-catering
accommodation in ski resorts. The purpose of this study is to investigate the moti-
vations of vacation home owners to let out their vacation home and the conditions
under which they might resign from renting. The secondary objective is to investi-
gate the importance of various attributes and services of the intermediary organisa-
tion when considering letting out the vacation home. Due to major difficulties in
accessing the target group, a case study method, representing two ski resorts, was
chosen. According to the results it can be suggested that the owners of a ski resort
vacation home are better-off than the average Finnish households, they seem to be
younger than the average Finnish vacation home owners and they use their property
less than the owners of traditional summer cottages. The most important motivator
to rent out a vacation home in a ski resort seems to be economic. Letting the vaca-
tion home out also seems to be a decision which was made in the initial stages of
the project of acquiring a vacation home. The respondents expect the agent to be
trustworthy and offer easy flexible service towards the owner as well as the poten-
tial tourists. Due to the limited data, the results of this study have to be considered
as tentative and as a basis for future research.

1 Introduction
The Nordic tradition of having vacation homes, especially summer cottages, dates
back to the late 19th century. The pioneering generations of “summer cottagers”
came from the urban elite. During the 1920s and 1930s the social base of vacation-
home owners broadened: the middle class civil servants, academics and office
clerks started to build themselves less imposing summer houses. Their modesty
was not only a question of money but also a quest for simplicity and more natural
life styles (Löfgren 1999, Sievänen & Pouta 2002).

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Raija Komppula, Helen Reijonen, Tuomas Timonen

From the 1960s onwards the increase in the number of vacation homes has been
expansive and owning a second home has also become recreational for ordinary
people (Hiltunen 2004).

According to Statistics Finland (2005, Nieminen 2004), there are approximately

400 000 vacation homes owned by private Finnish people. 13% of these owners
have rented or thought about renting out their vacation home to tourists (Nieminen
2004). There are also more than 30.000 vacation homes owned by companies and
communities (Nieminen 2004), which offer these facilities to their stakeholders. It
must be noted that in the aforementioned statistics a free-time residence refers to “a
residential building intended for free-time use that is permanently constructed or
erected on its site, or to a residential building that is used as a holiday or free-time
dwelling. Excluded are rental holiday cottages of enterprises engaged in the ac-
commodation industry, buildings in holiday villages and buildings on garden allot-
ments”. (http://www.stat.fi/til/kmok/index_en.html). A “building” refers to separate
one-family cottages and includes multiple apartments that are alike owned by joint
stock property companies.

During the 21st century the trend in fast growing ski resorts has been increasingly
more to build bigger units with several apartments, which means that the total
number of vacation homes, especially in ski resorts, is bigger today than reported in
the statistics (Kauppila 2007), which do not count the apartments. Even then, ac-
cording to the EU statistics, Finland is at the top of vacation-home owners: over
26% of Finnish households have a vacation home that they use (Reijo 2002). The
owners use their recreational property typically 40-60 days in a year (Pitkänen &
Kokki 2005). In addition, the vacation homes are used by others than the household
members themselves 16 days in a year on average (Nieminen 2004). Today, vaca-
tion-home owners, compared with the general population, are generally older, have
a higher income, and tend to be more often pensioners, but the owners’ families are
of average size (Sievänen, Pouta & Neuvonen 2007).

The mainstream vacation home in Finland is still the traditional summer cottage by
a lake fairly near the owner’s permanent home (Nieminen 2004, Sievänen & Pouta
2002), but during the last few decades people in Finland have begun to acquire va-
cation homes in regions with which they have no former kinship ties. Those, who
do not have a vacation home for their use, will also spend a typical country holiday
in a rented cottage with 39% of Finns having had a holiday in a rented country
holiday cottage (Laiho 2006).

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2 Vacation homes in ski resorts

The number of vacation homes is increasing especially in municipalities with well-
known ski centres (Statistics Finland 2005). This tourism-related acquisition of va-
cation homes is a new phenomenon in Finland. There were around 100 ski resorts
in Finland in 2007. The smallest ski resorts may have just one lift and two slopes.
On the other hand, the largest resort, Levi, has 45 slopes and 26 lifts. The propor-
tion of lift ticket sales of the ten largest resorts was approximately 60% of all sales.
Exotic Finland and its northern location are also of interest to foreign skiers, with
tourists coming especially from Russia and England. In 2007 there were approxi-
mately 900 000 foreign overnight stays in Lapland, the most popular ski area in
Finland, representing 40% of the total number of overnight stays. In the Lapland
Fell area the amount of foreign overnight stays was approximately 307 000 (36 %).
The growing demand has enhanced investments: new holiday apartments are being
built and the industries combined slope investments for the next two seasons (2007-
2009) will total approximately EUR 40 million (www.ski.fi, SHKY 2007). Rapid
growth of the biggest resorts (Levi, Ruka, Tahko, Himos) started in the beginning
of the 21st century.

Vacation homes owned by private families in ski resorts differ from the cottages of
typical rural areas. The cottages in ski resorts are more concentrated in and around
tourist centres whereas those in rural areas are more scattered along the shorelines
of lakes. In the early years of Finnish ski resorts, log cabins owned by private fami-
lies was the most common form of accommodation along with hotels. What is re-
markable is that different types of vacation homes are emerging and that the growth
has been biggest in areas that are characterised by these new kinds of vacation
homes in tourist centres (Tuulentie 2007). At the same time, the motives of owning
a vacation home in a tourist centre have changed and are more varied today. Ac-
cording to Blomster (2000), the most important motive for acquiring a cottage plot
in northern ski resorts is still to build a vacation home for personal use, but it is
more and more common to buy a plot and build a cottage as an investment, or for
rental purposes. According to Tuulentie (2007), the novelty of the phenomenon of
having vacation homes in tourist centres is strong among the baby-boom generation
that is approaching their retirement.

In ski destinations there is a growing demand for self-catering accommodation in-

stead of a traditional hotel room with breakfast and other services. According to a
study conducted among visitors of four ski resorts in Lapland, self-catering ac-
commodation is the most popular mode of accommodation in ski resorts especially
when travelling with the family. A cottage is preferable for 50% of ski tourists
travelling with friends. 29% of the respondents (n=862) stayed at a cottage or apart-
ment owned by their own family, relatives or friends or by their employer (Komp-
pula 2006).

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Raija Komppula, Helen Reijonen, Tuomas Timonen

In ski resorts a remarkable proportion of the accommodation is unregistered ac-

commodation units, i.e. cottages and several types of apartments owned by compa-
nies, associations, trade unions etc. and by private people. Although a number of
these vacation homes are available for the tourists through intermediaries, the beds
in these facilities are not within the overnight statistics. E.g. in Lapland the esti-
mated percentage of beds in other than registered facilities (i.e. hotels with more
than 10 rooms or holiday villages with more than 10 cottages) is 80–90% (Lapin
liitto 2007).

Vacation housing has been widely studied in Finland and it has been raised lately
for its significant development potential for rural areas. An extensive research pro-
ject “Flexible lifestyle and sustainable future of vacation housing in the Finnish
lake region” has, like several others, focused mainly on the traditional Finnish
“summer-cottage culture”. The new phenomenon, having a second home in a holi-
day resort has received surprisingly little attention among researchers in Finland,
although an increased number of free-time residences is one of the major objectives
of several ski resorts for example in Lapland (Kauppila 2007).

3 Research problem, questions

During the last years there has been a boom of investments in accommodation fa-
cilities in Finnish ski resorts. In Lapland, British investors are already common and
in the Lakeland area Russians have entered the market by investing in luxury villas.
Finnish construction firms buy real estate in the central areas of ski resorts and
build blocks of simple or intermediate flats to be sold to ordinary people. These de-
velopments challenge the rental businesses by their increasing capacity and varied
requirements of diverse owners of vacation homes. These developments also en-
courage new agents to enter the rental market.

Several agents offer rental services for self-catering accommodation in ski resorts.
There is one large nation-wide intermediary with online reservation services
(www.lomarengas.fi), having approximately 3000 cottages in total (1300 cottages
in ski resorts) in their selection. There are also a few webpages that call themselves
an information forum, where the customer can search for a suitable cottage and
then contact the owner directly (e.g. www.huvila.net, www.mokkiloma.net,
www.suomenmokit.fi). In ski resorts, the local destination-based intermediaries
have been the most important sources of information regarding self-catering ac-
commodation (Komppula 2006).

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The problem of cold beds has not yet emerged to any large extent in Finland. Sev-
eral practitioners suggest that the eagerness to rent out vacation homes, especially
in ski resorts, is a consequence of the fact that a remarkable proportion of these va-
cation homes are owned by ordinary middle class people, who need the income to
maintain their property. Log cabins have been, and still are, desired by tourists, but
the structure of the accommodation capacity is changing to apartment type accom-
modation. It can be suggested that in pursuance of increasing quality demands by
the customers, the level of accommodation quality is at the same time lowering in
the central ski resort areas. The high quality log cabins are built in more quiet areas
by investors, who are not interested in letting them out.

Up until now there is no available research data on vacation home rental businesses
in Finland. This study is an attempt to increase the understanding about this busi-
ness by presenting a case study on two ski resorts, which belong to the 15 largest in
Finland. The purpose of this study is to investigate the motivations of vacation-
home owners to let out their vacation home and the conditions under which they
might resign from renting. The secondary objective is to investigate the importance
of various attributes and services of the intermediary organisation when consider-
ing letting out the vacation home.

4 Research method
There is no extensive database on vacation home owners in Finland, even on a mu-
nicipal level. In the land registry, only the owners of “free-time residence build-
ings” are registered. Nevertheless, today, a remarkable proportion of vacation
homes in ski resorts are not traditional separate cottages. In order to collect data on,
for example, the resort level, the names and addresses of the vacation home owners
should be collected among the shareholders of every joint-stock property company
in each resort. This information is not public and should be received directly from
the companies.

Based on these difficulties in accessing data, a case study method was chosen. Be-
cause there is no former data available on ski resort accommodation in Finland in
general, and rental business in particular, this study is preliminary in nature. Two
ski resorts in central Finland were chosen as cases. Both of them belong to the 15
largest ski resorts in Finland. A decision was made to first interview a few experts
and practitioners in the ski resort accommodation businesses and based on their ex-
pertise formulate a questionnaire to study the opinions of vacation home owners.
The results of this study will increase our understanding of a new type of vacation
home ownership in Finland and give a starting point for a more comprehensive
study. The results will also help intermediaries develop their services for the vaca-
tion home owners.

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Raija Komppula, Helen Reijonen, Tuomas Timonen

The managing director of the destination marketing organisation (DMO) in destina-

tion A was interviewed in early November 2007. The purpose of the interview was
to formulate a clear picture on the development of ski resort A and the offering of
their accommodation services. In order to get access to the data on vacation home
owners in area A, the only source of information would be the data bases of the lo-
cal accommodation intermediaries. According to the interviewed DMO director,
80% of the accommodation capacity (not including the hotels) is under the control
of one private intermediary, the managing director of which was the next person to
be interviewed. The third interviewee was a managing director of a company,
which has been investing in high quality accommodation capacity on a buy and
lease back basis. This person also has a good general view of the supply of accom-
modation in this resort. In the ski area B only one person was interviewed for the
case study, because all authors were well acquainted with the case resort B due to
earlier research and development projects. The interviewed person is responsible
for the relationships with vacation home owners in the most prominent (and in fact
the only local) intermediary company in resort B.

The questionnaire was prepared based on the former studies on second housing in
Finland, expert interviews, and the study of Bieger, Beritelli and Weinert (2007)
was also utilised. Bieger et al. (2007) distinguished several factors discouraging va-
cation home owners from letting out their properties:
(1) Economic (lack of an accurate rate of return through high taxes on returns from
rent; high transaction costs; or no economic interest due to the owners’ existing
wealth);
(2) social (fear of losing prestige and reluctance to host people with different hab-
its, and
(3) psychological (loss of the potential freedom to use the vacation home at any
time on any basis; the feeling of losing control and intimacy; loss of an impor-
tant identification element).

In the beginning of 2008, a questionnaire was sent to the owners of vacation

homes, which were rented by the market leader intermediaries in both case ski re-
sorts. The questionnaire was sent to 228 vacation home owners (case A 179 owners
and case B 49 owners) by e-mail with a link to an electronic form. After two re-
minders, a total of 96 responses were received (respond rate 42,6%, in case A
45,5% and case B 32,6%). Because of the limited number of responses from case
B, the data analysis is concentrated on the entire data. The data unfortunately did
not allow a more sophisticated statistical analysis than frequency analysis and
cross-tabulation. Due to the small number of observations, the prerequisites of the
chi square test are not always valid, which prohibits us to suggest any conclusions
in terms of differences between different kinds of vacation-home owners. The re-
sults have to be considered as tentative and as a basis for future research.

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5 Case descriptions
The characteristics of the case resorts are presented in table 1. Data for the table is
based on four interviews and information published on the web page of the Finnish
Association of Ski Resorts (www.ski.fi).

Ski Resort A Ski resort B

The size of the ski resort com- amongst 10 largest amongst 15 largest
pared to others in Finland
First ski lift in the 1960s in the 1950s

Beds in commercial use in the 7,500 beds 1,200 beds

destination
Types of vacation-homes in com- - 35% separate cottages - 64% separate cottages
mercial use at the destination - 25% semi-detached apart- - 21% row house apartments
ments - 15% semi-detached apartments
- 25% row house apartments
-15% apartments in apart-
ment hotels
Types of vacation-home owners - 30% enterprises 70-80% private, who have acquired
- 30% private the vacation home for their own
- 30% investors use. The rental income is to cover
(According to an estimate maintenance costs.
50% of the total private and
50% enterprises)
Estimated percentage of vacation 50 % less than 50 %
homes that are in commercial use
Accommodation units/beds for 550 units / 130 units /
sale by the intermediary in ques- 3500 beds 360 beds
tion

Table 1: Case description

6 Results
The most typical respondent was a person aged between 43–63 (67% of the re-
spondents), who lived in a 2-person household (31%) whose annual gross income
was more than EUR 80,000. As much as 58% of the respondents belonged to an in-
come bracket of over EUR 80,000 per year. Only 10% of all Finns belong to this
income group (Statistic Finland 2007).

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The household size was, nevertheless, bigger than 2 persons in more than half of
the data: 21% of the respondents had children under school age and 42% had chil-
dren between the ages of 8-17 living in the same household.

The study examined also the background information relating to the respondents’
vacation homes. The majority of the respondents (93%) did not own a vacation
home in other ski centres. Two thirds of the respondents (67%) owned their vaca-
tion home as a private person and the most common type of vacation home still was
a separate cottage (33%), 31% were semi-detached apartments. Almost half (49%)
of the vacation homes were purchased less than 5 years ago and typically (65%)
were bought ready-made. Most often the vacation homes of the respondents had
two bedrooms (53%).

More than half of the respondents 58%, use their vacation home less than 20 days
per year, including those approximately 18% do not themselves use it at all. Com-
pared to the results of a study on vacation housing of capital region dwellers in
Lake-Finland (see Pitkänen & Kokki 2005), our results show a significantly lesser
own use of the vacation home.

63% of the owners claimed that the children or grandchildren did not use the vaca-
tion home at all. 18% of the respondents say that their children used the vacation
home for less than 10 days. Friends seem to use the vacation home more than chil-
dren, as about 58% of the respondents say that friends use their vacation home oc-
casionally.

As can be seen in table 2, almost half of the vacation homes were acquired during
the last five years. The age group between 43–63 included most of those who had
owned their vacation home for a longer period of time.

under 31-42 yrs 43-63 yrs over 63 yrs total

31 yrs
under 5 yrs ago 2,1 20,8 25 1 48,9
5–10 yrs ago 0 7,3 30,2 2,1 39,6
11–20 yrs ago 0 0 11,5 0 11,5
over 20 yrs ago 0 0 0 0 0
Total 2,1 28,1 66,7 3,1 100

Table 2: Age of the respondent and the time of purchasing the vacation home (%)

When examining the motives of the vacation home owners, the respondents were
asked to evaluate how important they considered the factors in question when as-
signing their current agent to let their vacation home (5=very important, 1=not at
all important).

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The most important motives of the owners to give their vacation home to an inter-
mediary were covering the maintenance costs, return on the invested capital and in-
creasing the degree of use of their vacation home. The least important motive was
recommendations by other people and creating new social contacts. The same con-
clusions can also be drawn by examining the means or the medians (table 3).

N med ka Std
2. covering maintenance costs 96 4 4,07 0,92
1. return on investment 96 4 3,84 1,099
3. increasing the use of the vacation home 96 4 3,44 1,312
5. organising the maintenance of the vacation home 96 4 3,4 1,192
9. other factor 23 4 3,35 1,229
6. desire to enhance the attractiveness of the ski centre by
letting out your vacation home 96 3 2,93 1,308
4. scarce use by the owner 96 3 2,74 1,233
7. recommended by other people 96 2 2,08 1,185
8. creating new social contacts 96 2 1,99 1,061

Table 3: Motives behind letting out a vacation home through an intermediary

It must, however, be noted that the variation for some factors was considerable. The
motives to let out one’s vacation home were examined through cross-tabulations
according to the age and income groups of the respondents and their own use of the
vacation home. The prerequisites for the chi-square test were not met for most of
the factors. When the income groups of households were re-classified as those
earning EUR 79,999 or less and those earning over EUR 80,000 per year, the pre-
requisites of the chi-square test were met for a part of the data. The desire to en-
hance the attraction of the destination would seem to be the more important motive
the greater the owner’s income was (p-value 0,012).

When the respondents were asked to pick the most important of the above-
mentioned motives, 43% named return on the invested capital, and 32% named
covering the maintenance costs as the most important factor. Increasing the degree
of use of the vacation home was the most important factor for 9,4% of the respon-
dents.

The decisions to let out the vacation home were usually made in the initial stages of
the project. A third of the respondents (32%) decided to let their vacation home as
soon as it was built or right after purchasing it, and another third (31%) made the
decision already when planning the acquisition.

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Raija Komppula, Helen Reijonen, Tuomas Timonen

The current intermediaries had been found through recommendations by 43% of

the respondents. 15% had found their agent through the Internet. Two thirds, 67%
of all the respondents had not thought about changing their intermediary.

The respondents were next asked to evaluate the intermediaries’ characteristics

with a scale of 5=extremely important to 1=not at all important. Nearly all charac-
teristics were considered at least somewhat important (=3). The respondents were
also asked to evaluate how well the intermediary performed in the characteristics
whose importance had just been assessed (5=excellent 1= poorly). The deviation
found in the responses relating to performance is clearly wider for most factors than
when evaluating the importance of the factors. The small size of the data narrows
the analysis possibilities and background variable comparisons for this question.
Also, it can generally be noted that the owners are at least fairly satisfied with the
services offered by the intermediaries as the mean average is less than 3 for only
one factor. There were also some unsatisfied customers in relation to pricing.

Importance-performance analysis (Hawes & Rao 1995, Magal & Levenburg 2005)
was used to get a whole picture of how important the customers thought certain fac-
tors to be in an agency service and, at the same time, how well they perceived their
intermediary to have performed regarding these factors. In the grid, 6 of the plots
were situated in the strategy quadrant of keep up the good work: (1) trustworthi-
ness, (2) good customer service, (10) booking on the internet, (9) visibility on the
internet, (3) ease of renting procedures and (12) the agent is known in the area.
These factors were related to ease of customer service as well as the familiarity of
the intermediary.

Of the factors, 2 were plotted in the quadrant where the importance as well as the
performance was low: (6) intermediary offers other related services to the owner
(maintenance, cleaning, security) and (13) the agent is known nation wide. Four of
the factors were plotted in the quadrant of possible overkill. These factors were not
seen very important for a rental agency but still the enterprises performed them
very well. These factors were related to supplementary services offered by the in-
termediary to the owner (7) and to the fact that a tenant should have all the local
services from the same agent (14). The two other factors were (4) “location / acces-
sibility” and (11)“agency’s long experience in the field”.

There were also two factors that were regarded as important success factors but in
which the performance was lacking. These factors were (5) “price” and (8) “mar-
keting efforts for customers by the agency”. The enterprises should concentrate in
developing their performance regarding these factors. There was only one plot just
below the iso-rating diagonal. This plot (“agency is well known in the target area”)
represented business area where performance exceeded importance.

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 Vacation home owner’s willingness to lease through an intermediary

All the rest 13 plots represented possible market opportunities. These plots were
above the iso-rating line and showed business areas where the performance is
poorer compared to the importance of these factors.

7 Factors discouraging vacation home owners from letting out

In the last section of the questionnaire the owners were enquired about possible fac-
tors that may discourage the owner to let out his/her vacation home. The possible
answers were: no (1), maybe (2) with great probability (3). Items 1-10 were bor-
rowed from Bieger et. al (2007), where they wished to capture the perceived conse-
quences of renting out the vacation home. It must be kept in mind that in their study
the target group was non-renters.

No % Maybe% Great probability %

7. costs through damage 8,3 44,8 46,9
6. financially unattractive 15,6 37,5 46,9
11. dissatisfaction about the
intermediary 27,1 29,2 43,8
4. damage of infrastructure 18,8 41,7 39,6
3. damage of personal items 30,2 41,7 28,1
5. additional work 36,5 44,8 18,8
1. limiting flexibility of use 51 32,3 16,7
8. no financial necessity to rent out 38,5 46,9 14,6
2. intrusion into privacy 58,3 31,3 10,4
9. loss of prestige 67,7 25 7,3
10. renting is not according to lifestyle 74 19,8 6,2

Table 6: Potential reasons for resigning from letting out the vacation home

The owners would resign letting out their vacation homes most likely because of
expenses related to accidents that occurred while their properties had been let out.
Both intermediaries have a practise where the tenant (tourist) would pay for the ac-
cidental damage that had occurred in the accommodation unit. The owners of the
vacation homes could also claim reimbursement from insurance. The emphasis on
this damage factor may be explained by the fact that if the damages are not noticed
in time they will eventually have to be paid for by the owner.

The second most important factor leading to resigning from letting out one’s vaca-
tion home was that the rental income for some reason or other was no longer finan-
cially attractive to the owner. In addition, dissatisfaction with the intermediary’s
services may lead to the owner taking their property off the market.

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The discouraging factors were cross-tabulated according to the age, income and de-
gree of one’s own use of the property. There were statistically significant differ-
ences between the income and the financial attractiveness (p-value 0,026). The
greater the income the more likely the owner gives up renting his/her holiday house
if there is no financial incentive. Income also seemed to be connected with dissatis-
faction with the intermediary’s services (p-value 0.015). Owners with greater in-
come were more likely to resign from letting out their property if they were not sat-
isfied with the intermediary’s services. Those owners who themselves used their
vacation home did not, according to this study, easily give up renting out their
property even if it restricted their own use of it (p-value 0,002).

The respondents of this study seem to be more or less satisfied with their decision
to let their vacation home out. The majority, 80%, of the respondents had not con-
sidered resigning from renting out their vacation home.

8 Discussion
The purpose of this study was to investigate the motivations of vacation-home
owners to let out their vacation home in a ski resort area, and the conditions under
which they might resign from renting. The secondary objective was to investigate
the importance of various attributes and services of the intermediary organisation
when considering letting out the vacation home. Due to major difficulties in access-
ing the target group, Finnish vacation home owners in ski destinations, a case study
method was chosen. Due to the limited number of observations (96), the results of
this study have to be considered as tentative and as a basis for future research. Any
conclusions referring to differences in opinions in age or income groups of owners
can not be made. Nevertheless, some suggestions and proposals for further research
can be presented, and comparisons with former studies can be made.

According to earlier studies, the owners of vacation homes in Finland use their rec-
reational property typically 40-60 days in a year (Pitkänen & Kokki 2005). Addi-
tionally, vacation homes are used by others their own household members 16 days
in a year (Nieminen 2004). According to the results of this study it can be sug-
gested that the owners of a ski resort vacation home (and their families) use their
property less than the owners of traditional summer cottages.

The vacation home owners that lease their property in a ski resort context seem to
be quite well-off. As much as 58% of the respondents of this study belonged to an
income bracket of over EUR 80,000 per year, whilst the amount among all Finns in
this income bracket is just10%. (Statistic Finland 2007).

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Owning a vacation home in a ski destination and letting it out is quite a new phe-
nomenon in Finland, which is confirmed also by the results of this study: almost
90% of the respondents have acquired their vacation home in question within the
last 10 years. Compared to earlier studies on vacation home owners, the owners of
vacation homes in this study seem to be younger than the average Finnish vacation
home owners (see e.g. Sievänen, Pouta & Neuvonen 2007).

Study results from 1045 non-renters in the Alpenarena area of Switzerland indicate
that the level of letting of vacation homes depends on when the second home was
purchased and on the owner’s age. Unfortunately, our data does not allow this kind
of analysis, but it shows some major differences, which deserve a closer look in the
future research. In our data the proportion of respondents (who are renters) in the
pre-war generation (year of birth 1945 or earlier) was only 3,1 as in Bieger et al.
data it was more than 50%. Two thirds of our respondents belonged to baby-
boomers (born 1946–1965) as in Bieger et al. data they represent over 40% of the
respondents (Bieger et. al 2007, p.268). Is this difference due to the fact that in the
Swiss data the respondents were non-renters and in ours renters, or is it only a coin-
cidence? Or are the Finnish ski destination vacation home owners on average
younger than the Swiss?

In the Swiss data 97% of non-renters were unwilling to rent their second home, but
up to 11% of non-renters could be motivated to rent out with more helpful informa-
tion, communication platforms and supporting services, such as cleaning and main-
tenance (Bieger et. al 2007, p.271, p. 266). Bieger et al. (2007) suggest that per-
suading non-renters to rent is a challenging task because it must overcome
psychological barriers. According to the Swiss data, the homes of younger owners
have a higher potential for destinations in terms of renting to visitors. The opportu-
nity to gain revenue is perceived relatively favourably by younger generations.
Older generations do not feel that letting a property limits the flexibility of their
own use and do not regard it so much as an intrusion into their privacy, but younger
generations do (Bieger et al. 2007, pp. 273–274).

In our data comparisons between the generations did not give reliable results, but it
can be argued that the most important motivator to rent out a vacation home in a ski
resort seems to be economic. Letting the vacation home out also seems to be a deci-
sion which was usually made in the initial stages of the project of acquiring a vaca-
tion home in a ski resort. Also the discouraging factors seem to refer to economic
losses: the owners would resign letting out their vacation homes most likely be-
cause of expenses related to accidents, or if the rental income for some reason or
other was no longer financially attractive to the owner. Social fear of losing pres-
tige, or intrusion into privacy were seen as potential reasons for resigning from let-
ting out for only 10% or even less of the respondents.

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Raija Komppula, Helen Reijonen, Tuomas Timonen

The current intermediaries had been found in most cases through recommendations.
Two thirds of all the respondents had not thought about changing their intermedi-
ary. The respondents expect the intermediary to be trustworthy and easy flexible
service towards the owner as well as the potential tourists. An interesting result
from the intermediary point of view is that the respondents do not value the sup-
plementary services provided by the intermediary as important properties of the
agent. Expectations were higher than the performance of the intermediary in terms
of the revenues and the marketing efforts of the intermediary company.

9 Conclusions
This study was a modest attempt to increase our understanding about the willing-
ness of a vacation home owner to let his/her property out through an intermediary
in a ski resort context. Our results suggest that a new type of vacation owner in
Finland is emerging: a younger, profit seeking vacation home owner, whose motive
in owning a second home in a ski resort area is not only to spend his/her leisure
time at the resort but also gain a return on investment and/or cover the cost of main-
tenance of the property. The cottage or apartment is no more a “home” like in ear-
lier times but more a “dwelling place” or a “residence” without personal, social or
psychological value for the family.

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 Vacation home owner’s willingness to lease through an intermediary

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 Estimating renting behaviour of
second home owners –
The case of Swiss Alpine destinations

Pietro Beritelli, Isabelle Engeler, Christian Laesser & Robert Weinert1

Abstract
Many Swiss alpine destinations suffer from underutilization of second home infra-
structure, because second home owners are not renting out their property. This pa-
per tries to identify reasons for this behaviour by estimating the likelihood of rent-
ing out second homes on the basis of perceived (individual) issues related to renting
out. The results reveal that renting out is mostly and very much associated with sac-
rifices such as intrusion into privacy and loss of flexibility which needs to be over-
compensated by financial benefits in terms of that the perceived financial compen-
sation is about double as high as the non-financial sacrifices.

Keywords: Second home ownership, willingness to rent out

1 Introduction
Second home tourism around the world has become a substantial form of tourism
(Hall and Müller, 2004). While most people still buy second homes in their own
countries, an increasing number are also venturing abroad. However, research on
second homes is a largely neglected topic. Few reliable figures exist on the number
of second homes around the world (Timothy, 2001), mainly due to poorly meas-
ured statistics and different, sometimes conflicting definitions of second homes
(which mostly also include holiday homes) provided by institutions, governments,
and researchers alike (Fraguell, 1996; Barke, 1991). The lack of accurate official
records of temporary international and domestic migrants compounds the problem
(King, Warnes, and Williams, 2000).

___________________
1
Names are in alphabetical order and do not constitute the individual contributions to this
paper.

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Pietro Beritelli, Isabelle Engeler, Christian Laesser, Robert Weinert

A study conducted in 2002 with the Swiss population (Bieger and Laesser, 2002)
revealed that approximately 12% of Swiss households own or possess a second
home. An additional 11% of households have regular, privileged access to someone
else’s holiday home (privileged here means free access or access at a much reduced
rate).

Globally, second homes are often considered a property investment, and thus rented
out commercially (Müller, 1999). Yet, the majority of Swiss second home owners,
according to the above study, as well as to Bieger, Beritelli, and Weinert (2007) do
not rent out their property.

A number of hypotheses which originally have emerged out of a previous qualita-

tive study can be associated with non-renting behaviour:

First of all, most of these homes are within an acceptable travelling time of a week-
end trip (Bieger and Laesser, 2002). Owners thus may use their second home fre-
quently themselves (mainly during weekends), or at least want to be flexible in
terms to make short term decisions on when and how to make use of their second
home (Hall and Müller, 2004). This behaviour would inevitably result in low rent-
ing ratios.

Hence, we posit H1: The more flexibility a second home owner calls for, the less
the likelihood that he/ she is inclined to rent out a given property.

Secondly, Switzerland is a very mature market, with an affluent population (Hop-

kins, Rodi, and Vincent, 2002) as well as with highly evolved buying environment
(Bieger and Laesser, 2005; D’Souza and Rao 1995; Ehrenberg, Barnard, and
Scriven, 1997). For many, there might be no economic need or equivalent value to
rent out, because the potential sacrifices or disutility from renting out may out-
weigh the economic benefits or utility. Consequently, many second homes remain
vacant during most of the year.

Hence, we posit H2: The less financial constraint there is, the higher the perceived
financial compensation for non-financial sacrifices needs to be.

Notwithstanding if second homes were used regularly or not at all, the destinations
still have to provide peak oriented communal infrastructure (peaks which some-
times last less than one month per year; Andersen et al., 2008). However, and at the
same time, they are prevented from economic benefit from tourism, because second
homes are not utilised to their maximum potential. From many destinations’ stand-
points, second homes that are not rented out are thus increasingly considered as a
serious economic and social challenge.

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 Estimating renting behaviour of second home owners

This research offers some insights into the rationales of second home owners to-
wards renting out by trying to predict the renting behaviour (renting out vs. non
renting out in the past as well as in the future) on the difference of a number of per-
ceived potential benefits (positive values) and sacrifices (negative values). The op-
erationalisation is based on the following core research question:
(1) Which selection of perceived potential benefits and sacrifices does
(2) increase or decrease the likelihood of someone renting out his/
her second home
(3) to what extent?

By this we thus posit a generic perceived value approach.

2 Literature review
Within the field of consumer research, and its extension to service quality and satis-
faction research, the construct of perceived value is identified as one of the most
important research approaches, and has thus been researched extensively (for ex-
ample, Gale, 1994; Parasuraman and Grewal, 2000; Woodruff, 1997; Zeithaml,
1988). However, there is no consistent definition of “value” in the literature. First
approaches in the field of microeconomics describe perceived value as the differ-
ence between the benefits (or utility) from, and the sacrifices required for, the re-
ception, and use of a specific good or service (Sinden and Worrell, 1979; Smith,
1776). Following this definition, and based on Kahneman and Tversky’s (1979)
prospect theory, Thaler (1985) conceptualized perceived value as a function of both
acquisition utility and transaction utility. Acquisition utility is the expected pleasure
gained from purchase and use of the product, less the displeasure of paying for it
(Urbany, Bearden, and Weilbaker, 1988). Transaction value is defined as the refer-
ence outcome, that is, the value of paying a price compared to a reference price
(Thaler, 1985). However, some studies using this conceptualization show that it is
difficult to disentangle the measures of acquisition and transaction value (for exam-
ple, Al-Sabbahy, Ekinci, and Riley, 2004; Grewal, Monroe, and Krishnan, 1998;
Petrick and Backman 2002). Therefore, numerous studies extend the perceived
value construct. Many researchers argue that the value of an object or service is
mainly determined by the trade-off between price, price fairness, and quality (for
example, Martins and Monroe, 1994). Yet, other authors suggest that viewing value
as a trade-off between only quality and price is too simplistic (for example, Bolton
and Drew, 1991; Sweeney and Soutar 2001).

The current marketing literature offers multifaceted perceived value conceptualiza-

tions, which mostly distinguish more than two dimensions. Overby, Gardial, and
Woodruff (2004), as well as Woodruff (1997), identify key areas of consensus
among the dimensions. Perceived value is

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Pietro Beritelli, Isabelle Engeler, Christian Laesser, Robert Weinert

(1) linked to a product or service (for example, Myers and Shocker, 1981);
(2) perceived by customers, rather than objectively determined by a seller
(for example, Butz and Goodstein, 1996);
(3) is specific to a use situation (for example, Sheth, Newman, and Gross, 1991);
(4) is a trade-off between benefits and sacrifices (e.g. Zeithaml, 1988).

Pursuant to Zeithaml’s (1988) concept, Woodruff (1997) and Woodruff and Gardial
(1996) offer a conceptual approach, proposing that: “Customer value is a cus-
tomer’s perceived preference for and evaluation of those product attributes, attrib-
ute performances, and consequences arising from use that facilitate (or block)
achieving the customer’s goals and purposes in use situations.” Consequently, we
assume that this is also the case with regard to second home ownership.

3 Methodology
The process basically included a qualitative pre-study and a quantitative main
study. This paper will focus on the latter; however the qualitative pre-study is
shortly discussed as well.

3.1 Pre-study
The qualitative pre-study mainly included two steps.
First, and in order to generate items with regard to potential benefits and sacrifices
of renting out second homes, a series of in-depth interviews was conducted in mid
2004 in Switzerland. We followed a methodological concept by Woodruff and
Gardial (1996) who introduced a customer value hierarchy with three levels to
measure customer value:
(1) desired product attributes and attributes performances;
(2) desired consequences in use situations; and
(3) customers’ goals and purposes.

Overall, 53 respondents (28 renters; 25 non-renters) produced 186 ladders across

these three hierarchy levels, with an average of 3.5 ladders per respondent (cf.
Beritelli, Weinert and Laesser, 2008).

Second, 12 items with regard to perceived benefits and sacrifices (issues) were cre-
ated from the results of the previous qualitative study by means of statements. They
included the following: (in parentheses: acronyms; differentiation according to sac-
rifices and benefits): Renting out

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 Estimating renting behaviour of second home owners

(1) decreases the flexibility of own use (flexibility; sacrifice),

(2) constitutes an intrusion in my privacy (privacy intrusion; sacrifice),
(3) can lead to damages of personal items (items damages; sacrifice),
(4) can lead to inside and outside property damages (property damages; sacrifice),
(5) creates additional efforts on my behalf (efforts; sacrifice),
(6) makes no sense financially, as the marginal effort is higher than the marginal
benefits (financial rationale; benefit),
(7) creates damage induced costs (damage costs; sacrifice),
(8) is not necessary, as there is no financial necessity (financial necessity; bene-
fit),
(9) constitutes loss of prestige (prestige loss; sacrifice),
(10) misrepresents my personal life style (life style; sacrifice), does create
additional income (income; benefit),
(11) can create new social contacts (social contacts; benefit),
(12) makes sense for the development of the destination (development; benefit).

3.2 Main study

The main study (Beritelli, Laesser, and Weinert, 2008), for which the data collec-
tion took place as part of a more extensive project in 2004, can be characterized as
follows:

Survey instrument: The survey instrument consisted of a written, self-

administrated questionnaire (paper-and-pencil survey) and included a number of
question batteries to a number of issues, such as: socio-demographics and data with
regard to the second home, benefits and sacrifices with regard to renting out, previ-
ous renting out experience and future willingness to rent out, and other (not related
to this particular paper).

Sampling: The survey was sent out to 3,931 owners of second homes in the desti-
nation of Flims-Laax (a major alpine destination in Switzerland), who are currently
(i.e. in 2004) not renting out. 1,204 (26%) of those questionnaires were returned
and could be included in the analyses.

Data analysis: For analysing the data, we performed two stepwise binary logistic
regressions (conditional forward; maximising F-value and only include coefficients
significantly different from 0), one incorporating the previous renting out experi-
ence and the other one with future willingness to rent out as dependent variables,
with the statements developed in the pre-study assumed to be independent.

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Pietro Beritelli, Isabelle Engeler, Christian Laesser, Robert Weinert

Data scales/ coding: Both dependent variables (previous renting out experience as
well as future willingness to rent out) were scaled as dummies, with -1 denominat-
ing no and +1 denominating yes. The independent variables, denominating the is-
sues (benefits and sacrifices) associated with renting out a second home, were for-
mulated as statements and scaled/ coded as follows: -2 for strong objection, -1 for
objection, 0 for indifference, 1 for support, and 2 for strong support.

4 Results and discussion

4.1 Descriptives
Of the non-renters in 2004, 10.5% and 3.5% of the test persons have previous rent-
ing out experience or state willingness to rent out in the future respectively. 1% has
previous renting out experience and state willingness to rent out in the future. These
numbers somewhat indicate that renting behaviour is not a static but more of a dy-
namic concept.

4.2 Results with regard to the analysis

The model fit the data reasonably well, with R squares of .401 (previous renting out
experience) and .421 (future willingness to rent out) respectively. 42% and 46% of
all ’yes’ cases were correctly classified. Overall, and with regard to each model,
only 4 out of the 12 potential issues tested could be included in the (conditional)
models.

Renting out… (Issue) B S.E. Wald df Sig. Log odds

…constitutes an intrusion in my privacy -0.677 0.122 30.789 1.000 0.000 -41.2%
…is not necessary (no financial necessity) -0.398 0.130 9.305 1.000 0.002 -48.9%
…creates damage induced costs -0.271 0.134 4.071 1.000 0.044 -33.7%
…does create additional income 0.375 0.123 9.227 1.000 0.002 45.5%
Constant -1.374 0.169 66.513 1.000 0.000 -74.7%
How to read:
-%: The higher the value of a given concern, the less likely a second home owner has been renting out.
+%: The higher the value of a given concern, the more likely a second home owner has been renting out.

Table 1: Log odds w/r to previous renting out experience

Renting out… (Issue) B S.E. Wald df Sig. Log odds

…constitutes an intrusion in my privacy -0.526 0.122 30.789 1.000 0.000 -41.0%
…decreases the flexibility of own use -0.607 0.162 14.005 1.000 0.000 -45.5%
…is not necessary (no financial necessity) -0.529 0.194 7.419 1.000 0.006 -41.1%
…does create additional income 0.635 0.232 7.454 1.000 0.006 88.6%
Constant -2.625 0.298 77.676 1.000 0.000 -92.8%
How to read:
-%: The higher the value of a given concern, the less likely a second home owner will be renting out.
+%: The higher the value of a given concern, the more likely a second home owner will be renting out.

Table 2: Log odds w/r to future willingness to rent out

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 Estimating renting behaviour of second home owners

Overall, and as the results in tables 1 and 2 reveal, renting out a second home is
negatively associated with an intrusion of privacy, decrease of flexibility as well as
potential damage induced costs. The only rationale for renting out would consist of
financial necessity (indicating rather a reason under constraints) and/ or to generate
additional income (indicating a rather voluntary reason).

More detailed, and with regard to previous renting out experience, a one notch
increase of the perception that renting out the second home would constitute a pri-
vacy intrusion would result in a decrease of likelihood to rent out by 41% (and vice
versa). Similar effects can be observed with regard to the perceptions, according to
which renting out a second home
– creates damage induced costs (34%) and
– is not necessary, as there is no financial necessity (49%).

As for the future willingness to rent out, the privacy intrusion effect is of similar
magnitude. Additionally, effects can be observed with regard to the perceptions, ac-
cording to which renting out a second home
– decreases the flexibility of own use (46%)
– is not necessary, as there is no financial necessity (41%).

While most log-odds with regard to the sacrifices are more or less equal (no matter
if someone has had past renting out experience or is willing to rent out in the fu-
ture), significant differences can be observed with regard to the statement renting
out does create additional income.
– previous renting out experience: both the absolute log odds with regard to the
financial necessity as well as additional income are about equivalent to the non-
financial sacrifices. This basically can be interpreted as the financial benefit
from renting out needed to just compensate any of the non-financial sacrifices.
– future willingness to rent out: the absolute log odd with regard to additional
income from renting out is more than double as high as the absolute log odd
with regard to the financial necessity to rent out. This result can be interpreted
as follows: the prospect financial compensation for non-financial sacrifices
(decrease of flexibility) must be significantly higher whenever the landlord has
a real choice and if there was no financial necessity to rent out in the first place.

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Pietro Beritelli, Isabelle Engeler, Christian Laesser, Robert Weinert

4.3 Results with regard to hypotheses

In the introduction section, two hypotheses were put forward. Both are, as shown in
this section, supported by the results:

H1: The more flexibility a second home owner calls for, the less the likelihood that
he/ she are inclined to rent out a given property.

This hypothesis is supported by the results, as a one-notch change with regard to

the perception that renting out the second home decreases the flexibility of own use
results in a decrease of likelihood to rent out by 49% (past renting experience) and
45% (future willingness to rent out).

H2: The less financial constraint there is, the higher the perceived financial com-
pensation for non-financial sacrifices needs to be.
This hypothesis is supported by the results by two ways.

First of all, there is a proportional trade-off between non-financial sacrifices and fi-
nancial compensation under constraints, i.e. when renting out is necessary for fi-
nancial reasons (cf. to log odd of renting out is not necessary = 41%, which is close
to equal to all the non-financial sacrifices).

Secondly, and under voluntary conditions (renting out does create additional in-
come), perceived financial benefits would need to be approximately double as high
(i.e. 88%) than the non-financial sacrifices for someone to be willing to rent out in
the future (cf. to log odd of renting out constitutes an intrusion in my privacy =
41%; log odd of renting out decreases the flexibility of own use = 46%).

Hence, under voluntary conditions the financial compensation for non-financial

sacrifices needs to be over proportionally high. In contrast, and under financial con-
straints (financial necessity to rent out), non-financial sacrifices only would need to
be compensated proportionally.

5 Implications and conclusions

In this paper we tried to estimate the likelihood of renting out second homes on the
basis of perceived (individual) issues. The results revealed that renting out is
mostly associated with sacrifices such as intrusion into privacy and loss of flexibil-
ity which only needs to be overcompensated by financial benefits which are gener-
ally perceived as much higher. To put it differently: Under the current framework
of the case presented in this paper (Swiss Alpine destinations), there is neither the
individual necessity to generate financial compensation from a second home nor an
exogenous (public) framework which brings forward corresponding incentives.

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 Estimating renting behaviour of second home owners

Not surprisingly, the large majority of second home owners which currently do not
rent out are likely not going to rent out their property in the future neither.

Hence, and from a destination’s perspective, the incentives targeting at non-renters

need to be multi-faceted. They have to be based on
(1) increasing financial benefits combined with
(2) a decrease of non-financial sacrifices.

Most efficiently, financial incentives need to be considered to change the percep-

tion of financial costs/ benefits of non renters. These incentives can either be set up
by special property taxes for non-renters combined with financial refunds for rent-
ers (e.g. bonus malus taxation system).

Then, the issue of flexibility and privacy intrusion need to be seriously addressed.
There is not much one can do about perceived privacy intrusion, as the underlying
concept is highly personal as well as emotional and thus not accessible by rational
arguments. In contrast, flexibility issues might well be addressed by means to
modularize a second home for multiple party usage, e.g. removable wardrobes and
cabinets (which might be centrally stowed and installed upon a call), one private
room per unit, where the owner could self-store personal items, and more. The lat-
ter could also serve to reduce the perception of privacy intrusion. This sort of ap-
proach has been occasionally implemented in time share objects; however, there is
so far little full-modularisation available in the market.

Last but not least potential damage costs and inconveniences need be addressed.
This can be done by the destination taking over the facility management of selected
objects and thus granting for up-to-date maintenance (at neither costs nor inconven-
ience for the owner).

5.1 Limitations and future research

There are three limitations to this study.

1. Only second home owners in one key alpine destination were surveyed; one
could rightly claim that such an approach is not representative for the entire
Alpine area. We clearly acknowledge that objection, however we advert the fact
that the destination where the study was conducted is only known to Central
Europeans.

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Pietro Beritelli, Isabelle Engeler, Christian Laesser, Robert Weinert

2. The test persons belonged to a group which was currently (in 2004) not renting
out. The lack of a full sized control group might have skewed the results to a
certain extent. However, and as indicated in the paper, only a minimal part of
second home owners rent out their property. Additionally, and in terms of
analysis methodology, binary logistic regression does not require normal
distribution which is why this does not really pose a serious problem.
Nevertheless, and for future research, it would be interesting to gain further
insight into the renting behaviour of more renters.
3. The items used as predictors in the model do not stem from the literature but
from a qualitative pre-study. One could object that this hampers the study to
some extent. However, and relativising this objection, there is little to no
literature addressing this topic (particularly in 2004); and even if there was, it
does not count for cultural differences of the cases (cf. to the fact that
Switzerland is a very mature travel market).

For future research, we strongly encourage developing and testing measures to

overcome each of the barriers discussed in this paper. Moreover, a multi-
destination study including a proper control group incorporating second homer
owners who are currently renting out might provide further insight into this com-
plex phenomenon.

Acknowledgements
We thank the Swiss Federal Commission for Technology and Innovation as well as
our partners for funding and participating in this project. Those partners include:
Switzerland Tourism, Interhome AG, and Weisse Arena AG.

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 Estimating renting behaviour of second home owners

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312
 List of Authors

Dr. Otto Bammer

FH-Prof.
FH Wien, University of Applied Sciences of WKW
Institute for Real Estate Science
Währinger Gürtel 97
1180 Wien (Austria)
e-mail: [email protected]

Dr. Pietro Beritelli

Institute for Public Services and Tourism (IDT-HSG)
University of St.Gallen
Dufourstr. 40a
9000 St.Gallen (Switzerland)
e-mail: [email protected]

Matthias Beyer, Dipl.-Ing.

mas|contour
Tourism Consulting and Regional Planning
Fidicinstr. 15
10965 Berlin (Germany)
e-mail: [email protected]

Dr. Thomas Bieger

Professor
Institute for Public Services and Tourism (IDT-HSG)
University of St.Gallen
Dufourstr. 40a
9000 St.Gallen (Switzerland)
e-mail: [email protected]

313
List of Authors

Dr. Philipp E. Boksberger

Professor
Institute for Tourism and Leisure Research
University of Applied Sciences Chur
Comercialstr. 22
7000 Chur (Switzerland)
e-mail: [email protected]

Dr. Manat Chaisawat

Associate Professor and Director of MBA
in Hospitality and Tourism (International Program)
Prince of Songkla University, Phuket Campus
80 Moo 1, Vichit-Songkram Rd.,
Kathu, Phuket 83120 (Thailand)
e-mail: [email protected]

Lara Cinesi
University of Bergamo
P. Za Rosate 2
24100 Bergamo (Italy)
e-mail: [email protected]

Dr. Giovanni Danielli

Professor
Institute of Tourism
Lucerne University of Applied Sciences
Rösslimatte 48
6002 Lucerne (Switzerland)
e-mail:[email protected]

Jordi Datzira-Masip, MSc

c/ Princesa, 31, 3r
08003 Barcelona (Spain)
e-mail: [email protected]

Raf De Bruyn
Master in Economic Geography & Master in Tourism Management
Tourist Office for Flanders
Grasmarkt 61
1000 Brussels (Belgium)
e-mail: [email protected]

314
 List of Authors

Isabelle Engeler, M.A. HSG

Institute for Public Services and Tourism (IDT-HSG)
University of St.Gallen
Dufourstr. 40a
9000 St.Gallen (Switzerland)
e-mail: [email protected]

Dr. Jörg Frehse

Innsbruck University School of Management
Department of Strategic Management, Marketing and Tourism
Universitätsstr. 15,
6020 Innsbruck (Austria)
[email protected]

Dr. Frank M. Go
Professor
Rotterdam School of Management
Centre for Tourism Management
Erasmus University Rotterdam
Burgemeester Oudlaan 50
P.O.Box 1738
3000 DR Rotterdam (The Netherlands)
e-mail: [email protected]

Mag. (FH) Patrick Hainzl

Institute for Real Estate Science
FH Wien, University of Applied Sciences of WKW
Währinger Gürtel 97
1180 Wien (Austria)
email: [email protected]

Marcus Herntrei, MBA

Institute for Regional Development and Location Management
European Academy of Bolzano
Viale Druso 1
39100 Bolzano (Italy)
e-mail: [email protected]

315
List of Authors

Dr. Hubert Job

Professor
Institute of Geography
Julius-Maximilians-Universität Würzburg
Am Hubland
97074 Würzburg (Germany)
e-mail: [email protected]

Marco Julià-Eggert
Master of Management in Hospitality
Zagrebaćka Avenija 104, 617
10000 Zagreb (Croatia)
e-mail: [email protected]

Dr. Peter Keller

Professor
Institute for Tourism
Faculty of Business and Economics HEC
University of Lausanne
Internef
1015 Lausanne-Dorigny (Switzerland)
e-mail: [email protected]

Lisa Kofink, Dipl.-Ing.

Institute for Regional Development and Location Management
European Academy of Bolzano
Viale Druso 1
39100 Bolzano (Italy)
e-mail: [email protected]

Dr. Raija Komppula

Professor
University of Joensuu
Department of Business and Economics
Po. Box 111
80101 Joensuu (Finland)
e-mail: [email protected]

316
 List of Authors

Dr. Christian Laesser

Professor
Institute for Public Services and Tourism (IDT-HSG)
University of St.Gallen
Dufourstrasse 40a
9000 St.Gallen (Switzerland)
e-mail: [email protected]

Mia Lammens
Master in geography and Master in urbanism and spatial planning
Tourist Office for Flanders
Grasmarkt 61
1000 Brussels (Belgium)
e-mail: [email protected]

Dr. Dagmar Lund-Durlacher

Professor
MODUL University Vienna
Department of Tourism and Hospitality Management
Am Kahlenberg 1
1090 Vienna (Austria)
e-mail: [email protected]

Dr. Andrea Macchiavelli

Professor
University of Bergamo
P. Za Rosate 2
24100 Bergamo (Italy)
e-mail: [email protected]

Dr. Rico Maggi

Professor
IRE - Istituto di Ricerca Economica
CP 4361
6904 Lugano (Switzerland)
e-mail: [email protected]

317
List of Authors

Mag. Michael Mair,

FH-Prof.
Institute for Tourism Management
FH Wien, University of Applied Sciences of WKW
Währinger Gürtel 97
1180 Wien (Austria)
e-mail: [email protected]

Xavier Matteucci, MSc,

MODUL University Vienna
Department of Tourism and Hospitality Management
Am Kahlenberg 1
1090 Vienna (Austria)
e-mail: [email protected]

Daniel Metzler
TNS Infratest, Travel, Tourism & Transportation
Landsberger Str. 338
80687 Munich (Germany)
e-mail: [email protected]

Dr. Harald Pechlaner

Professor
Institute for Regional Development and Location Management
European Academy of Bolzano
Viale Druso 1
39100 Bolzano (Italy)
e-mail: [email protected]

Helen Reijonen, lic.

University of Joensuu
Department of Business and Economics
Po. Box 111
80101 Joensuu (Finland)
e-mail: [email protected]

Dr. Giovanni Ruggieri

Department S.E.A.F. – Università degli Studi di Palermo
Viale delle Scienze,
90128 Palermo (Italy)
e-mail: [email protected]

318
 List of Authors

Dr. Miriam Scaglione

Research Associate
University of Applied Sciences Valais
Institute for Economics & Tourism
Techno Pôle 3
3960 Sierre (Switzerland)
e-mail: [email protected]

Claudia Scholz
IRE – Istituto di Ricerca Economica
CP 4361
6904 Lugano (Switzerland)
e-mail: [email protected]

Dr. Markus R. Schuckert

Institute for Tourism and Leisure Research
University of Applied Sciences Chur
Comercialstr. 22
7000 Chur (Switzerland)
e-mail: [email protected]

Dr. Hubert Siller

Professor
School of Tourism and Leisure
Management Center Innsbruck (MCI)
University of Applied Sciences
Weiherburggasse 8
6020 Innsbruck (Austria)
e-mail: [email protected]

Dr. Jürg Stettler

Professor
Institute of Tourism
Lucerne University of Applied Sciences
Rösslimatte 48
6002 Lucerne (Switzerland)
e-mail: [email protected]

319
List of Authors

Marc Stickdorn
School of Tourism and Leisure
Management Center Innsbruck (MCI)
University of Applied Sciences
Weiherburggasse 8
6020 Innsbruck (Austria)
e-mail: [email protected]

Tuomas Timonen, M. Sc.

University of Joensuu
Department of Business and Economics
Po. Box 111
80101 Joensuu (Finland)
e-mail: [email protected]

Oraphan Tungsomboon
Prince of Songkla University, Phuket Campus
80 Moo 1, Vichit-Songkram Rd.,
Kathu, Phuket 83120 (Thailand)

Dr. Serena Volo

Free University of Bozen,
School of Economics and Management
Piazzetta dell’Università, 1
39031 Brunico (BZ) (Italy)
e-mail: [email protected]

Mag. (FH) Daniela Wagner

Institute for Tourism Management
FH Wien, University of Applied Sciences of WKW
Institute for Real Estate Science
Währinger Gürtel 97
1180 Wien (Austria)
email: [email protected]

320
 List of Authors

Dr. Klaus Weiermair

Professor
Innsbruck University School of Management
Department of Strategic Management, Marketing and Tourism
Universitätsstr. 15
6020 Innsbruck (Austria)
e-mail: [email protected]

Robert Weinert, M.A. HSG

Institute for Public Services and Tourism (IDT-HSG)
University of St.Gallen
Dufourstrasse 40a
9000 St.Gallen (Switzerland)
e-mail: [email protected]

Dr. Anita Zehrer

School of Tourism and Leisure
Management Center Innsbruck (MCI)
University of Applied Sciences
Weiherburggasse 8
6020 Innsbruck (Austria)
e-mail: [email protected]

321
^ Real estate is one of the driving factors of destination
development. In some destinations value added from the
construction and sales of second homes even surpasses value
added created in the traditional tourism sectors.
This book, edited by Peter Keller and Thomas Bieger,
contributes to the deeper understanding of the dynamics
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• The Role, Structure and Development of Destination Real

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Management Strategies

• Public-Private Governance Approaches for Managing Holiday

Property Market Development
The book provides a unique database for the important topic
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with contributions from 43 researchers from 10 countries
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www.ESV.info

www.ESV.info