The true managerial efficiency of international tourist hotels in Taiwan: three-stage data envelopment analysis

Abstract

This study uses international tourist hotels in Taiwan as samples to measure the true managerial efficiency of international tourist hotels based on the three-stage data envelopment analysis (DEA). Three operation models are tested, namely, group and non-group entities, chains and independents, and large- and small-scale entities, to explore the operation factors determining the management performance. Empirical results show that group operation is not the main determinant of operation efficiency of international tourist hotels, whereas small-scale hotels (those with rooms fewer than 300) and chain hotels have significantly superior operational efficiency. By using a three-stage DEA, the management can avoid erroneous resource distribution decisions and enhance managerial efficiency.

Keywords:

• hotel operational efficiency
• resource distribution

Notes

According to the Taiwan Tourism Bureau, the number of travellers and tourist arrivals increased from 2.37 million and 0.84 million in 1997 to 3.72 million and 1.65 million in 2007, respectively. Until 2007, the number of international tourist hotels increased from 54 in 1997 to 60 in 2007, whereas the number of ordinary tourist hotels increased from 22 in 1997 to 30 in 2007. It appears that international tourist hotels still play a major role in the development of tourism in Taiwan.

Copeland et al. (2005) argued that flexibility has its value. For example, one may choose to build a series of small, less operationally efficient facilities (hotels) than large and more efficient facilities (hotels) because, as they are more modular, small facilities are more flexible and can better respond to fluctuations in demand than larger facilities. This scale of flexibility can be valuable enough to offset economies of scale.

The commonly proposed adjustment procedure involves companies with favourable operation environments or those with relatively good luck to adjust the inputs of a producer upward to avoid the possibility of extremely disadvantaged producers adjusting the inputs downward to a negative value (Fried et al., 2002).

The current study's definition of ‘business group’ comes from the book Business group studies in the Taiwan region published by China Credit Information Service in 2006. There are four standards for selecting group business samples: (1) member quantity: composed of three or more companies; (2) shareholding: publicly owned firms in which Taiwanese citizens have at least 51% ownership; (3) core company: core leaders of this company often make the decisions, or the operation, management, and supervision authority of the company is greater than that in affiliated companies; and (4) region: Taiwan should be the site where the core company will be established.

Imperial Hotel Taipei merged with the InterContinental Hotels Group in 1996 but withdrew in June 2002. Gloria Prince Hotel Taipei signed a managerial contract with Le Meridien in 1999 and merged with the Japanese Prince Hotel chain in 2001. These two hotels are not considered chain or independent operation and are thus eliminated.

Santos Hotel has had fewer than 300 rooms since 2002, and Marshal Hotel had only over 300 rooms in 1997. Their scales, being indefinable, are eliminated.

As the first stage and the third stage of the samples are relevant and paired, we use the Wilcoxon signed rank test to examine the efficiency change in the first and third stages. The results show that significant differences exist in the 1997–2006 period.