Benchmarking operational performance: the case of two hotels

Purpose - To present an actual case study that was carried out to investigate and benchmark the operational performances of two hotels in a large city. Design/methodology/approach - The study involves the comparison of the hotels' performances with each other as well as their respective benchmarks on the basis of data on monthly costs and revenues. The benchmark operations are stated in terms of target costs and revenues that are derived from industry standards for comparable hotels and corporate strategic goals. For performance measurement a new non‐parametric performance measurement method called Operational Competitiveness Rating Analysis (OCRA) is used for its relative simplicity, flexibility, and ability to allow for differences in hotels' guest profiles and competitive priorities. Findings - The areas of strength and weakness are revealed in the measured performances of the two hotels' operations. While the hotels' performances converge near the end of the study period, they both fall short of reaching their respective benchmark performance levels. This may be partly due to benchmark cost/revenue levels being set unrealistically high. OCRA is shown to be an appropriate tool for measuring and comparing hotels' operational performance. Research limitations/implications - While OCRA can also incorporate the intangible dimensions of performance, this study has not taken into consideration the quality dimension of hotel performance. Practical implications - It is shown that a service operation's performance can be profiled and benchmarked using cost/revenue data. Originality/value - This paper demonstrates a flexible approach to measuring operational performance in service organizations, which can be used by non‐specialists.