Agglomeration Effects and Performance: A Test of Essay

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Agglomeration Effects and Performance: a Test of the Texas Lodging Industry," author William Chung (2001) explores how agglomeration is used by Texan lodging companies to benefit their bottom lines and increase their profits. In different industries, the location and proximity of competition has a lot to do with how profitable that company is. When there are more comparable options in a limited area for consumer's money, then the cost of the product or service is more competitive. People will likely utilize the service which provides the greatest value for their money. In an industry like lodging, when there are many places to stay in a limited area, the cost and quality of the individual businesses will impact the amount of customers who choose a given place of business. This will require those who have stakes in the area to both increase the quality of their service and to decrease the price so that the customers will choose them. In locations where there is less competition, the businesses have more freedom to choose a price point to their liking because there are no or fewer similar venues competing for the same customer.

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Chung (2001) sees this as a problem for industries because it lowers costs, but also asserts that there may be a benefit to the close proximity of same-service businesses.

Chung examines the lodging industry in terms of the potential benefits of close proximity agglomeration because he believes it is a business which offers similar services and that is thus more easily comparable. Location is the most important aspect in determining the agglomeration benefits. Reputation is also paramount in the potential success of the incorporation of additional locations to an established chain. According to Chung (2001), in rural areas where there are fewer hotels and motels to create….....

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