This research investigates the role of clustering, learning and innovation in retaining competitiveness in an existing tourism area in a peripheral region of Europe. To do this it draws on the tourism resort area known as the Costa del Sol in southern Spain. Structurally, it focuses on hotel and catering businesses, which are considered to be at the heart of the tourism industry. Tourism is shown not only to be fundamental to the development ofthis coastal agglomeration, but also critical to the development of the province of Malaga (of which the Costa del Sol is a part) and the wider region of Andalucia. Hence the need to examine the evolution oftourism, the sources of competitive advantage and how such advantage can be retained in a globalised marketplace. The key proposition is that retaining competitive advantage can best be achieved through learning and innovation and that agglomerations provide a milieu in which learning and innovation are stimulated. Agglomeration theory and the role of learning and innovation are tested through an examination of the spatial and temporal evolution of hotel and catering businesses and through questionnaire surveys covering these businesses. In particular, the surveys are directed at addressing the issues of learning and innovation and assessing the extent to which the Costa del Sol operates as a 'learning region'. Questionnaire work met with severe problems of non-response despite being undertaken in conjunction with local business organisations. Nevertheless, sufficient responses were obtained to provide some tentative answers to the questions being posed and to provide the foundation for further research. The principal conclusions were that the Costa del Sol has acted as a growth pole and seedbed for business development, and that learning and innovation are promoted as much by competition as by co-operation. Finally, some public policy implications are drawn from these conclusions.