Case study What is the optimal number of hotel rooms: Spain as a case study Nissim Ben-David a , Sharon Teitler-Regev a, * , Avi Tillman b, 1 a Department of Economics and Management, The Max Stern Academic College of Emek Yezreel, Israel b Deparment of Managment, Bar Ilan University, Israel highlights  There is a positive relation between number of tourists and number of rooms.  Model allows calculating optimal number of hotel rooms in Spain for origin country.  There is a negative relation between the cost of travel and the number of tourists. article info Article history: Received 8 February 2015 Received in revised form 5 April 2016 Accepted 25 May 2016 Keywords: Hotel rooms Policy Tourism abstract The main contribution of the paper is that it proposes a well-defined model and an empirical estimation technique for determining an optimal targeted number of incoming tourists and for getting as close as possible to this target by controlling variables that are affected by tourism authorities policies. We as- sume that the planner wishes to minimize the gap between the actual and the optimal number of tourists in order to get as close as possible to the optimally desired number. The actual number of tourists from each country is affected by the cost of travel as well as by exogenous variables. We constructed a system of two simultaneous equations, where the number of tourists and the cost of travel are the endogenous variables. We estimated the system for incoming tourism to Spain from various countries and forecasted the actual number of incoming tourists. Using the forecasted equation we were able to extract the optimal number of rooms needed in order to get as close as we could to the desired number of tourists. After defining several targeted levels for the number of incoming tourists to Spain from Canada, Japan, Belgium, The Netherland, US, Italy, France, Germany and UK, we extracted the optimal number of needed hotel rooms in order to get as close as possible to the targets. This paper is important since it provide a tool for the decision makers to effect the number of incoming tourists by changing the level of variables that are under the control of the decision maker. © 2016 Elsevier Ltd. All rights reserved. 1. Introduction Tourism is an important part of the economy of most modern countries. Therefore its development should be carefully planned. According to Blazevic and Jelusic, the characteristics of economic development in the past period should be taken into consideration when projecting regional economic development, together with the acceptable goals set for the future period (Blazevic & Jelusic, 2006). The demand for tourism to a certain destination is heavily dependent on the relative prices and cost of travel between the country of origin and the destination country (Covington, Thunberg, & Jauregui, 1995; Falk, 2015; Garin-Munoz, 2006; See- tanah, Sannassee, & Rojid, 2015), as well as on other factors, such as tourism infrastructure, the number of available rooms, income, price level at the destination, currency exchange rate, consumer price index, population, economic crises, and political risks (Chen & Haynes, 2015; Eilat & Einav, 2004; Hanafiah & Harun, 2010). In characterizing a proper model for analyzing demand for tourist services, many studies have differentiated between countries serving as the main origin to a certain destination. For example, Hiemstra and Wong (2002) used long-term and to some extent * Corresponding author. The Max Stern Academic College of Emek Yezreel, Israel. E-mail addresses: nissimB@yvc.ac.il (N. Ben-David), sharont@yvc.ac.il, sharont@ yvc.ac.il (S. Teitler-Regev), a.tillman@ucl.ac.uk (A. Tillman). 1 All authors contributed equally to the study. Contents lists available at ScienceDirect Tourism Management journal homepage: www.elsevier.com/locate/tourman http://dx.doi.org/10.1016/j.tourman.2016.05.016 0261-5177/© 2016 Elsevier Ltd. All rights reserved. Tourism Management 57 (2016) 84e90