Besides gravity-related factors, the GDP per capita of host and
source countries is also considered a determinant of FDI activity.
FDI activity is expected to increase with both variables, reflecting
the fact that FDI in the hotel industry mainly occurs between
countries with a similar level of wealth and factor endowment
(UNCTAD, 2007; Dunning & McQueen, 1982).
Low labour costs and corporate taxes in the host country have
traditionally been a key factor in hotel groups' cross-border investments.
Previous empirical studies widely agree that FDI flows
are highly sensitive to changes in corporate tax rates of the host
and also the parent country and ultimately matters for the
location choice of multinational firms (Feld & Heckemeyer, 2011).
In general, higher parent country tax rates lead to higher FDI
outflows, whereas a higher host country tax rate leads to lower
FDI inflows. Labour cost differentials between the parent and
host country also play animportant role for FDI, particularly for
cost-saving vertical FDI.