Evaluating the Hotel Industry Performance Using Efficiency and Effectiveness Measures

ABSTRACT

Most studies on performance evaluation in the hospitality industry solely focus on efficiency measurement; however, effectiveness, an integral part of organizational performance that can influence its competitive stance in the market, is ignored. Therefore, this study aims to measure the performance of Indian hotels considering both efficiency and effectiveness simultaneously using a two-phase evaluation model with panel data. The efficiency and effectiveness scores are measured using data envelopment analysis. McKinsey’s nine-cell matrix has also been deployed to show the competitive positioning of the hotels being studied. The results yield no significant correlation between the efficiency and effectiveness scores; nevertheless, there does seem to be a strong positive correlation between effectiveness scores vis a vis the overall performance of a hotel per se.

KEYWORDS:

• Performance measurement
• hotels
• efficiency
• effectiveness
• data envelopment analysis
• India

Acknowledgments

We are indebted to Editor Prof. (Dr.) Clayton W. Barrows, and two anonymous Reviewers, for guiding us in refining this paper. This research has benefitted significantly from their inputs.

Notes

1. The total contribution of Travel & Tourism to India’s GDP INR14,018.5 billion in 2016 and expected to grow by 6.7% to INR14,964.3 billion in 2017. For the full report refer: https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2017/india2017.pdf, Accessed January 21, 2018.

2. For the detailed report refer, ‘The Travel & Tourism Competitiveness Report 2017ʹ (5 April 2017), https://www.weforum.org/reports/the-travel-tourism-competitiveness-report-2017, accessed February 10, 2018.

3. For the full report refer, “Boom or Bust? Where is tourism heading” (IPK international, 2017),https://www.itbkongress.de/media/itb/itb_dl_all/itb_presse_all/ITB_WTTR_A4_2018_interaktiv.pdf, accessed February 2, 2018.