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Top 10 Best States for Hotel Business in USA (2025)-Top U.S. Locations for High ROI

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June 25, 2025
Best States for Hotel Business in USA
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If you had $5 million to launch a hotel, would you build in Florida, Vermont, or Texas? The stakes are high, and getting it wrong could cost you everything. That is why we have ranked the Best States for Hotel Business in USA in this guide.

In 2024, U.S. hotels reached a record ADR of $158.67 and RevPAR of $99.94, according to insights by Lodging Magazine. Yet market-wide RevPAR growth was just 1.8%, with top 25 markets growing only 2.7%, highlighting increasing competition.

So, if you are wondering how to start a hotel business in the USA, or you are simply researching the best U.S. state to open a resort hotel, this article will walk you through the most promising destinations based on revenue potential, tourism data, and investor-friendliness.

Key Takeaways

  • Choose states with high travel demand and business-friendly tax laws.
  • Match your hotel style to the state’s tourism or business profile.
  • Know each state’s rules on tax, zoning, and licensing.
  • Always model your ROI using local ADR and operating costs.

Understanding the Hotel Business in the U.S.

Before exploring the best states for hotel business in USA, it is important to understand the different types of hotel models and how they fit into specific markets.

A hotel is essentially a service-based business that provides short-term accommodation, and often additional services like food, leisure, or workspace.

The hotel industry is diverse, and choosing the right business model is just as important as choosing the right location. Here is a breakdown of the main types:

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Hotel TypeDescriptionBest Fit States
Resort HotelsFull-service properties focused on leisure, often with spas, golf, or beaches.Florida, Arizona, Tennessee
Business HotelsCater to corporate travellers; include meeting rooms, fast Wi-Fi, and transport access.Texas, New York, North Carolina
Boutique HotelsSmaller, stylish hotels offering unique, localised guest experiences.New Jersey, Vermont, Pennsylvania
Budget & RoadsideLow-cost lodging targeting travellers on highways or budget trips.Alabama, Tennessee
Eco-Lodges & Country InnsFocused on sustainability, local materials, and immersive nature experiences.Vermont, Arizona

This context will help you align your investment or business vision with the right state, depending on the target market and hotel type.

A Quick Comparison of the Best States for Hotel Business in USA

This snapshot gives you a side-by-side look at the top-performing states for hotel investment in the US. It reflects a blend of tourism appeal, business travel volume, cost structures, and regulatory advantages.

StateMain AdvantageIdeal Hotel Type(s)
FloridaMassive year-round leisure tourism, no income taxResort, family leisure, beachfront boutique
TexasBooming cities, high RevPAR, low tax environmentBusiness, midscale, extended-stay
New YorkHighest ADR & occupancy, strong global tourismLuxury, corporate boutique, convention hotels
New JerseyUrban commuter access, Atlantic City leisure trafficCasino, airport hotel, corporate commuter lodging
PennsylvaniaBalance of business, heritage, and event travel demandConvention centre, urban boutique, university lodging
VermontSeasonal tourism, eco-conscious travellersLodge, eco-hotel, countryside B&B
TennesseeMusic, family tourism, and tax-friendlyBudget, themed boutique, highway hotels
AlabamaGulf Coast and heritage sites, with low startup costsRoadside inns, historic B&Bs, and budget motels
ArizonaWellness and desert tourism, high average revenueSpa resorts, wellness boutique, and desert lodge
North CarolinaTech and banking travel hubs, consistent growthCorporate, airport, long-stay executive hotel

See Also: Hospitality Business Ideas You Can Start In Nigeria

Top States to Launch Your Hotel in the U.S.

Now that we have reviewed the business models and compared the top states at a glance, let us dive deeper.

This section explores why each of the best states for hotel business in USA cut. From local tourism trends to tax laws and hotel segment performance, we unpack the unique selling points of all ten states.

1. Florida

Florida is consistently ranked among the best states for hotel business in the USA, thanks to its tourism-driven economy and investor-friendly tax policies. With no personal income tax and active state support for hospitality development, it offers strong financial incentives for hotel owners.

In 2024, the state attracted over 105 million visitors, with Orlando alone pulling in more than 70 million due to world-famous attractions like Disney and Universal Studios. Other hotspots like Miami, Tampa, and the Florida Keys see steady demand across resort, family, and boutique segments.

Beyond leisure, Florida’s growing tech hubs and major seaports in cities like Miami and Jacksonville ensure year-round occupancy from business travellers and cruise traffic alike.

Why Invest Here?

FactorAdvantage
Tourism Volume105M+ visitors annually, with strong domestic and international draw
Tax BenefitsNo personal income tax or state-level corporate income tax
Hotel Segment FlexibilityProfitable across resort, family, and business models
Year-Round DemandConsistent travel due to climate, conventions, sports, and cruise traffic
Global Destination AppealA recognisable tourism brand which is easy to market and scale

Florida is ideal if you are targeting leisure travellers, family vacationers, or even eco-luxury segments along the coast. Its infrastructure, climate, and tax structure combine to make it the most consistently profitable state for new hotel ventures.

2. Texas

Texas is a heavyweight in the U.S. hospitality market, making it one of the best states for hotel business in the USA, especially for entrepreneurs targeting the business and convention segments.

The Lone Star State combines a low-tax, pro-business climate with rapidly growing cities and robust travel demand.

Houston, Austin, Dallas, and San Antonio are among the fastest-growing metro areas in the U.S. and some of the busiest for business travel, tech conferences, and sporting events. In 2024, Houston recorded one of the highest RevPAR (Revenue Per Available Room) increases nationwide, underscoring its market strength.

Texas also benefits from low regulatory barriers, no state income tax, and competitive property costs relative to coastal markets.

Why Invest Here?

FactorAdvantage
Economic GrowthFast-growing metros like Austin and Dallas attract both business and leisure travellers
Tax ClimateNo state income tax plus business-friendly regulations
High RevPAR MarketsHouston and Dallas consistently lead U.S. RevPAR growth
Event & Business TravelFrequent conventions, sports, tech events, and business meetings
Diverse Hotel DemandSuitable for boutique, business, extended-stay, and midscale brands

See Also: Hotel: 10 Most Expensive Hotels In Nigeria For Entrepreneurs

3. New York

If you are aiming for premium rates and consistent occupancy, New York, especially New York City, remains one of the best states for hotel business in the USA. Despite high entry costs, the sheer volume of tourism, business travel, and international appeal delivers unmatched revenue potential.

In 2024, New York City recorded an average daily rate (ADR) of $314 and occupancy levels near 84%, topping national charts. From Broadway and Wall Street to world-renowned museums and global events, NYC sustains demand across luxury, business, and boutique hotel segments.

The state’s hotel industry is highly regulated, with new licensing requirements and staff mandates on the horizon. However, for well-funded investors or experienced hoteliers, the market rewards outweigh the red tape.

Why Invest Here?

FactorAdvantage
Top ADR & Occupancy$314 ADR and 84% occupancy make NYC the most profitable hotel market in the U.S.
Global Travel HubConsistent international, business, and event tourism
Luxury & Boutique DemandHigh-performing segments with steady year-round bookings
Market PrestigePremium branding opportunities and global visibility
Strong ROI PotentialHigh room rates and RevPAR offset higher operational costs

4. New Jersey

Often overshadowed by its neighbour across the Hudson, New Jersey quietly holds its own as one of the best states for hotel business in the USA, especially for entrepreneurs seeking proximity to major metros without the New York price tag.

With Newark Liberty International Airport, the PATH train into Manhattan, and a dense network of highways, New Jersey benefits from both commuter traffic and regional tourism.

Atlantic City continues to attract leisure travellers with its casinos, boardwalks, and entertainment, while cities like Jersey City, Hoboken, and Secaucus serve the overflow of New York’s corporate and events market.

Operational costs are generally lower than in NYC, and redevelopment zones offer additional incentives for hotel investors targeting urban renewal areas or transport-linked properties.

Why Invest Here?

FactorAdvantage
Proximity to NYCAccess to New York’s business and tourism traffic at a lower cost
Diverse Market SegmentsCasino, airport, extended-stay, and commuter hotels all perform well
Infrastructure AccessExcellent road, rail, and air connectivity for business and leisure travellers
Lower Entry CostsMore affordable property and operational costs than Manhattan
Urban Revitalisation OpportunitiesStrong redevelopment support in Jersey City and Newark

See Also: Examples Of Tourism Business Ideas To Start Now And Make Money

5. Pennsylvania

Pennsylvania offers a diverse mix of business, cultural, and leisure travel, positioning it as one of the best states for hotel business in the USA, especially for hoteliers looking to tap into mid-Atlantic demand without the high costs of neighbouring states.

Philadelphia is a major draw for history buffs, medical tourism, and corporate events, while Pittsburgh thrives as a tech and education hub. Add to that seasonal attractions like Hersheypark, Amish country, and the Pocono Mountains, and you have year-round demand across both urban and rural segments.

The state also hosts numerous universities and hospitals, creating ongoing need for short-term accommodation near campuses and medical centres. For investors, Pennsylvania strikes a balance: strong occupancy potential, moderate startup costs, and market flexibility.

Why Invest Here?

FactorAdvantage
Balanced MarketA mix of business, cultural, academic, and leisure travel
Strong Urban DemandPhiladelphia and Pittsburgh offer consistent occupancy across segments
Lower Cost of EntryMore affordable than neighbouring NY and NJ markets
Event & Convention TrafficRegular demand from academic, medical, and professional conferences
Tourism DiversityAttractions range from heritage sites to theme parks and scenic retreats

6. Vermont

Vermont may not be the largest tourism market in the U.S., but it is one of the most specialised, and for that reason, it is among the best states for hotel business in the USA for those targeting eco-conscious, seasonal, and boutique travel segments.

The state thrives on fall foliage tourism, ski season, and eco-lifestyle escapes, attracting visitors who are willing to pay a premium for tranquillity, scenery, and local charm.

Properties like countryside inns, boutique lodges, and eco-luxury retreats perform well, particularly in destinations like Stowe, Burlington, and Woodstock.

Vermont also boasts a progressive traveller profile, with rising interest in sustainability, organic farming, and artisanal experiences making it perfect for hoteliers who value storytelling, design, and a slower pace of travel.

Why Invest Here?

FactorAdvantage
Seasonal Demand PeaksHigh occupancy during the fall and winter tourism seasons
Niche Market StrengthStrong appeal for boutique, eco-lodge, and experiential stays
Premium ADRs in Rural AreasVisitors pay for exclusivity and environment-driven design
Low Saturation RiskFewer chain hotels mean stronger performance for independents
Destination BrandingVermont’s identity aligns perfectly with lifestyle and sustainable travel

7. Tennessee

Tennessee is easily one of the best states for hotel business in the USA, offering a powerful mix of cultural tourism, family travel, and affordability.

Cities like Nashville draw millions through music, conventions, and nightlife, while Gatlinburg and Pigeon Forge benefit from steady seasonal traffic to the Great Smoky Mountains.

For anyone researching how to start a hotel business in the USA, Tennessee provides favourable tax conditions, no personal income tax and relatively low business costs, making it a smart, scalable choice.

If you are targeting themed lodging near Dollywood or launching a boutique stay in Music City, Tennessee offers both demand and affordability.

Why Invest Here?

FactorAdvantage
Tourism HotspotsNashville, Gatlinburg, and Memphis draw strong year-round visitor flows
Affordable Entry PointLower land and development costs vs coastal tourism states
Tax BenefitsNo personal income tax; pro-growth business environment
High Family Travel DemandProximity to the Smoky Mountains, theme parks, and national events
Strong Cultural IdentityBranding potential tied to music, heritage, and southern hospitality

See Also: Best State for a Box Truck Business: Top 10 U.S. Locations to Launch and Scale Your Box Truck Business

8. Alabama

Alabama may not top every list of hospitality hotspots, but it is quietly emerging as one of the best states for hotel business in the USA for investors seeking lower entry costs and rising regional demand.

From the Gulf Shores beaches to civil rights heritage sites in Montgomery and Birmingham, Alabama offers strong potential for budget hotels, roadside inns, and historically themed lodging. It is also a top destination for regional sports tournaments, university events, and industrial corridor travel.

For those wondering where to start a hotel in the U.S. on a moderate budget, Alabama delivers with its business-friendly taxes, growing tourism, and solid interstate connectivity make it a smart choice for scalable investments.

Why Invest Here?

FactorAdvantage
Low Startup CostsAffordable real estate and construction relative to national averages
Emerging Leisure MarketsGrowth along Gulf Coast and historical tourism routes
Regional Events & TravelConsistent demand from sports, education, and local events
Tax-Friendly EnvironmentCompetitive lodging tax rates and modest business regulation
Less CompetitionOpportunity to stand out in a less saturated hotel market

9. Arizona

Arizona has carved out a strong identity in the U.S. hospitality scene, making it one of the best states for hotel business in the USA, especially for investors focused on resorts, wellness tourism, and desert adventure experiences.

Destinations like Phoenix, Scottsdale, and Sedona attract visitors year-round with golf, spas, hiking, and sunshine. This translates into consistently high ADR (Average Daily Rate) and RevPAR, particularly in the upper-midscale and luxury categories. Even off-peak seasons see strong occupancy thanks to the state’s expanding convention and business travel sectors.

If you are wondering how to start a hotel business in USA and want a balance between premium pricing and operational consistency, Arizona offers attractive opportunities across resort, boutique, and extended-stay models.

Why Invest Here?

FactorAdvantage
Year-Round Travel AppealWarm climate, golf, wellness, and desert adventure tourism
High Hotel RevenuesArizona ranks among the top states for hotel revenue per property
Diverse Demand SegmentsStrong mix of leisure, corporate, and health/wellness travel
Luxury Market StrengthScottsdale and Sedona support premium ADRs and resort-style stays
Stable Operating ConditionsPredictable seasonality and minimal extreme weather disruptions

10. North Carolina

Blending corporate expansion with a rising quality of life, North Carolina has become one of the best states for hotel business in the USA, particularly for entrepreneurs eyeing the extended-stay, corporate, and lifestyle segments.

Cities like Charlotte and Raleigh-Durham are booming finance, tech, and healthcare hubs, attracting steady business travel.

The state also benefits from strong population growth, expanding airports, and a growing events calendar, all of which fuel consistent hotel occupancy.

For investors wondering where to start a hotel in the U.S. with solid infrastructure and long-term growth, North Carolina offers a compelling balance of affordability, scale, and rising demand.

Why Invest Here?

FactorAdvantage
Business Travel DemandCharlotte and Raleigh lead the Southeast in corporate travel volume
Population & Job GrowthStrong in-migration, urbanisation, and workforce expansion
Segment FlexibilityExtended-stay, lifestyle, and corporate hotels all perform well
Airport ConnectivityCharlotte Douglas is a major U.S. travel hub
Cost EfficiencyCompetitive development and labour costs compared to larger metros

Key Hotel Industry Trends Every Investor Should Know

If you are researching how to start a hotel business in the USA or deciding where to start a hotel in the U.S., knowing what drives guest demand is essential.

These trends highlight why certain regions stand out as the best states for hotel business, and how you can align your offering for success.

Here is a look at the most important shifts shaping the U.S. hotel industry today:

TrendWhat It Means for Your Hotel Business
Growth in Extended-Stay HotelsMore professionals, digital nomads, and relocating families prefer longer stays with residential comforts.
Demand for Wellness and Eco TravelGuests increasingly choose hotels that offer spa services, nature access, or sustainability practices.
Technology-Led Guest ExperienceContactless check-in, smart room controls, and mobile bookings are now expected by most travellers.
Investment in Secondary CitiesHotel demand is rising in mid-sized cities like Raleigh, Tucson, and Birmingham, offering lower competition.
Rise of Short-Term RentalsHotels are competing by focusing on loyalty programmes, unique guest experiences, and strong brand identity.
Expansion of Lifestyle and Boutique SegmentsPersonalised design, immersive environments, and curated experiences are winning guests over.
Bleisure and Flexible Travel PatternsBusiness travellers are blending work and leisure, boosting mid-week and weekend occupancy.

Factors to Consider Before You Invest

Before deciding where to start a hotel in the U.S., it is critical to go beyond tourism stats. You need to assess the legal, financial, and operational landscape of each state

Before you commit to a market, make sure to assess the following critical factors:

FactorWhat to Evaluate
Lodging and Occupancy TaxesResearch state and local lodging tax rates; calculate how these impact nightly pricing and net income.
Zoning and Land Use LawsVerify zoning codes for commercial use, height limits, parking requirements, and local restrictions.
Labour Costs and StaffingCompare minimum wage levels, average hospitality wages, and access to qualified hotel staff.
Permits and LicensingIdentify required permits: building, fire safety, health inspection, signage, and tourism tax licences.
Competition and Market SaturationConduct a market analysis on the number of hotels, occupancy rates, pipeline reports, and RevPAR trends in the area.
Utility and Operating CostsAssess regional costs for electricity, water, insurance, and maintenance based on climate and location.

This practical checklist helps you compare states not just by opportunity, but by the real costs and compliance demands of operating there.

Operational & Regulatory Checklist

Even in the best states, success depends on more than just guest bookings. Operations, compliance, and local regulations can make or break profitability.

Here is what you need to review before launching your hotel:

Lodging Tax Rates by State

Lodging and occupancy tax rates can significantly affect your nightly pricing strategy and bottom line. Here are a few examples:

StateLodging/Occupancy Tax EstimateNotes
Vermont9% Meals & Rooms Tax + up to 3% Local Option TaxVaries by town; eco-lodges may face stricter scrutiny
Alabama4–5% State Lodging Tax + Local Add-onsLocal rates vary by city or county
Florida6% State + up to 6% Local Tourist Development TaxVaries by county; some areas charge max 12%
Texas6% State + Local Hotel Occupancy Tax (up to 9%)Local cities like Austin and Dallas may add higher rates
New York4% State + NYC adds up to 5.875% + nightly room feeHigh taxes in NYC; be aware of additional surcharges

Zoning, Labour, and Licensing Considerations

Beyond choosing a location, every hotel must comply with local development rules, labour laws, and industry-specific licensing.

These factors directly impact how quickly you can open, how much you will spend, and how smoothly your operations will run.

CategoryWhat to Check
Zoning & Land UseConfirm your site is zoned for commercial lodging. Look out for residential limits or historic overlays.
Labour RegulationsReview local wage laws, union presence, and overtime mandates for hospitality staff.
Health & Safety LicensingDetermine which permits you need: food service, fire safety, elevator operation, and guest health protocols.
Environmental & Accessibility ComplianceEnsure your project meets ADA standards and any state-specific environmental review processes.

By checking these boxes early, you reduce costly delays and position your hotel for smooth day-to-day operations, whether it is in Florida, Texas, or a quieter state like Vermont.

Revenue Modelling & ROI Estimation

Before launching your hotel, you need to understand how much it will earn and what it will cost. Creating a reliable financial forecast helps you estimate return on investment (ROI), identify funding needs, and avoid surprises down the line.

Here is how to model it effectively:

Typical Startup Costs by Hotel Type

These figures reflect average per-room development costs across U.S. hotel segments, including land, construction, soft costs, FF&E, and pre-opening expenses.

This is what it realistically costs to launch a hotel in today’s market, according to the HVS Development Cost Survey 2024.

Hotel SegmentAverage Cost per RoomMedian Cost per RoomTypical Project SizeTotal Cost (50 Rooms)
Limited-Service Hotels$193,152$169,60150–80 rooms$8.4M–$9.6M
Midscale Extended-Stay$166,748$160,68360–100 rooms$9.6M–$10.5M
Upscale Extended-Stay$286,243$243,86470–120 rooms$17M–$20M+
Select-Service Hotels$325,416$254,77380–120 rooms$20M–$24M
Dual-Branded Hotels$266,478$230,685120–180 rooms$30M–$45M
Full-Service Hotels$497,076$405,727150–250 rooms$25M–$60M+
Luxury Hotels$1,094,547$1,021,577200–400 rooms$100M–$160M+

Performance Benchmarks: ADR, Occupancy & RevPAR

Understanding performance metrics is essential when modelling your hotel’s revenue. Key industry data from STR, AHLA, and CBRE suggests U.S. hotel performance is continuing to stabilise, approaching or exceeding pre-pandemic levels.

U.S. Hotel Industry Averages

MetricProjected Value
Occupancy Rate63.4%
Average Daily Rate (ADR)$162.16
Revenue Per Available Room (RevPAR)$102.78

Performance by Hotel Segment

Hotel SegmentAverage ADROccupancy RateRevPAR
Luxury / Upper Upscale$27367–68%$184
Midscale / Economy$8755%$48

ROI Forecast: Midscale vs Luxury Hotel

These examples are based on 50-room hotels, using national averages for ADR, occupancy, and startup costs. Operating expenses are estimated at 70% of gross revenue, which is standard in the industry.

ROI Comparison Table

MetricMidscale HotelLuxury Hotel
Rooms5050
ADR$87$273
Occupancy Rate55%68%
Annual Revenue$872,138$3,390,525
Operating Expenses (70%)$610,497$2,373,368
Net Operating Income (NOI)$261,641$1,017,157
Development Cost (50 rooms)$8,037,500 (at $160,750/room avg)$54,727,350 (at $1,094,547/room avg)
Annual ROI3.26%1.86%

Risks and Challenges of Starting a Hotel Business

No matter how promising the location, every hotel venture comes with its share of risks. From market saturation to changing guest expectations, these challenges can significantly affect your revenue and long-term success.

Below is a breakdown of the most common pitfalls to watch for, especially when entering new markets:

RiskWhat It MeansHow to Manage It
Market OversaturationToo many hotels in one area can lower prices and occupancy.Run a local feasibility study. Focus on underserved segments (e.g. extended stay).
Seasonal Demand FluctuationsVisitor numbers drop during off-seasons in tourist-heavy states.Target cities with business travel. Create off-season events or value packages.
High Operating CostsRising costs for labour, energy, insurance, and taxes can reduce margins.Choose low-cost states. Invest in energy-efficient systems and automation.
Zoning & Regulatory DelaysPermits, zoning, or construction delays can slow or stop your project.Verify zoning early. Hire local legal and planning experts before land purchase.
Tech-Driven Guest ExpectationsTravellers expect contactless check-in, Wi-Fi, and personalisation.Offer digital tools, strong branding, loyalty rewards, and tailored guest services.

Conclusion

Starting a hotel business in the U.S. can be highly rewarding if you choose the right state, plan with precision, and align with local market demand.

From the sun-soaked beaches of Florida to the affordable charm of Alabama, the opportunity is there for those who research, adapt, and invest wisely.

We want to see you succeed, and that’s why we provide valuable business resources to help you every step of the way.

Frequently Asked Questions (FAQs)

Which state in the US has the most hotels?

Texas leads the U.S. in total number of hotels, followed closely by California and Florida. These states offer large populations, strong tourism, and year-round demand, making them hotspots for hospitality development.

What is the best location to build a hotel?

The best location depends on your hotel type and business goals. For luxury resorts, Florida, Arizona, and New York offer high ADRs. For midscale or extended-stay, Texas, Tennessee, and North Carolina provide balanced costs and steady demand.

Is hotel business profitable in the USA?

Yes, but only with the right market fit, pricing strategy, and cost management. Midscale hotels can generate 6–8% annual ROI, while luxury projects may take longer but yield higher long-term value.

Which country is best for hotel business?

The USA is one of the top global markets due to its strong infrastructure, diverse travel demand, and robust financing options. Other strong contenders include the UAE (Dubai), Thailand, and France, depending on your focus (luxury, wellness, tourism).

How much does it cost to start a hotel in the USA?

Startup costs range from $3M for a small budget hotel to $100M+ for a luxury property, depending on location, size, and services offered. Refer to our full breakdown in the revenue modelling section for detailed estimates.

Do states offer tax incentives for hotel development?

Yes. States like Texas, Florida, Alabama, and Pennsylvania offer grants, tax rebates, and investment credits, especially in enterprise or tourism zones.

What hotel type gives the best ROI?

Midscale and extended-stay hotels generally offer the most consistent ROI due to lower development costs and higher occupancy, ideal for business, family, or relocation stays.

What is the best U.S. state to open a resort hotel?

Florida leads the way due to strong beach, cruise, and theme park tourism. Arizona and Vermont are great for wellness and nature resorts.

Where to start a hotel in the U.S. for long-term growth?

Look for cities with rising demand, low hotel saturation, and growing populations. North Carolina, Alabama, and Pennsylvania fit these criteria.

What are the best states for hospitality jobs?

Florida, Texas, and New York offer the most job opportunities in hotels, thanks to their large markets and steady tourism.

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ABOUT THE AUTHOR

Rebecca Ogunbayo

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