This study emphasises the crucial role of practical wisdom (“phronesis”) in the hotel industry, highlighting its impact on ethical behavior, operational reliability, and guest trust. The database was provided by the regional government in Extremadura and the national government in Portugal. Qualitative data from interviews and quantitative data managing from SEM-PLS were provided. In total, 175 rural hotels in Extremadura and Portugal have participated in this study. This study emphasises the significance of integrating ethical leadership with operational excellence to ensure sustainable tourism in rural border territories. It highlights the importance of practical wisdom (“phronesis”) in addressing complex ethical dilemmas while balancing cultural preservation and environmental responsibility. Key managerial practices include fostering safe spaces for ethical reflection and integrating technology with cultural sensitivity. These practices help build trust within communities and ensure long-term operational success while respecting local traditions and ecological concerns.
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