Are stars a good indicator of hotel quality? Assymetric information and regulatory heterogeneity in Spain

• A continuous quality indicator for the hotel sector based on “objective” and demand criteria is elaborated.
• There is significant overlap with respect to the quality levels between official adjacent categories of hotels.
• Regulatory fragmentation in assigning stars to hotels is responsible for its deterioration as a quality standard.

This paper proposes a methodology for continuous monitoring of the hotel sector based on “objective” and demand criteria. The method applies Multiple Correspondence Analysis (MCA) to hotel facilities and services. Using that indicator the impact of differing regional regulations relating to hotel classifications is duly analysed, based on information from The Official Guide to Hotels in Spain (OGHS). The results show that even though official stars classification might be considered a good indicator of quality, there also is significant overlapping with regard to levels of quality between adjacent official categories. It is suggested that the very coexistence of 17 different regulations is one of the reasons for this.