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I would think that if there are location specific based sites that they would come before all non-specific.
For instance, if I want a hotel in a city, should I get the your.hotel.com site before city.hotel.com sites?
Even this can be dodgy. I own a .co.nz domain name and my site is hosted with a local New Zealand owned and operated company. The words "New Zealand" are on pretty much all my pages. Yet the server it is hosted on is physically located somewhere in the US.
So as far as I can tell anyone reading my pages pretty much has to take my word for it that I'm located in New Zealand.
Examples? Canadian hosted sites targeting the US, US hosted sites targeting UK, austrian hosted sites with .de extensions etc etc.
The only reasonable factors for determination of laocalization of sites are ccTLDs and language.