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Weather Derivatives for Climate Risk Management in Hospitality: A Predictive Approach from Spanish Hotels
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Climatology significantly influences tourism, and climate change has raised concerns about future impacts. While climate risk management studies suggest derivatives like temperature futures for the hospitality sector, they often overlook market feasibility. Effective hedging requires an accessible, cost-efficient market, which depends on its profitability. This study evaluates the viability of a derivatives market for Spanish hotels to hedge temperature-related climate risks. Data from 2016–2023 across selected Spanish tourist cities was analyzed using Elastic Net Regression to identify locations where climate derivatives are most relevant. Findings show that temperature derivatives effectively hedge risks in cities where climate strongly affects hotel occupancy. The study offers findings into hospitality risk management and supports the creation of climate derivative markets tailored to tourism.
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