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Business Diversification in the Hotel Industry: A Comparative Advantage Analysis

Author

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  • Chia-Yu Yeh

    (Department of Economics, National Chi Nan University, 1 University Road, Puli, Nantou 54561, Taiwan)

  • Chiang-Ming Chen

    (Department of Economics, National Chi Nan University, 1 University Road, Puli, Nantou 54561, Taiwan)

  • Jin-Li Hu

    (Institute of Business and Management, National Chiao Tung University, Taiwan)

Abstract

The accepted norm of hotels generating the highest portion of revenue from their room sales does not apply in the case of Taiwan. International tourist hotels in Taiwan tend to diversify their business by expanding their food and beverage (F&B) services. According to international tourist hotels' financial statements for 1996–2008 (published by the Taiwan Tourism Bureau), almost 60% generate higher revenue from their F&B services. Drawing on the concept of comparative advantage, this study assumes that a hotel's comparative advantage depends on evaluating the profitability between the F&B departments and the lodging departments. The authors propose a simultaneous equation model with qualitative and limited dependent variables, drawing on the interactions between hotel profitability and revenue structure. The empirical results show that hotels in which F&B services contribute the majority of the revenue have a profitability advantage.

Suggested Citation

  • Chia-Yu Yeh & Chiang-Ming Chen & Jin-Li Hu, 2012. "Business Diversification in the Hotel Industry: A Comparative Advantage Analysis," Tourism Economics, , vol. 18(5), pages 941-952, October.
    • Handle: RePEc:sae:toueco:v:18:y:2012:i:5:p:941-952
    DOI: 10.5367/te.2012.0152
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    References listed on IDEAS

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    1. Lee, Lung-Fei, 1978. "Unionism and Wage Rates: A Simultaneous Equations Model with Qualitative and Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 415-433, June.
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    Cited by:

    1. Yang, Yang & Cao, Yang & Yang, Li-Ting (Grace), 2017. "Product diversification and property performance in the urban lodging market: The relationship and its moderators," Tourism Management, Elsevier, vol. 59(C), pages 363-375.
    2. Chen Hao & Xuegang Feng & Dandan Wu & Xiaodong Guo, 2024. "Board interlocks and corporate risk-taking: An empirical analysis of listed companies from tourism and related industries in China," Tourism Economics, , vol. 30(1), pages 174-211, February.
    3. Ming-Hsiang Chen & Kun Lun Wu & Hung-Jen Su, 2014. "Research Note: A Study of the Business Cycle of the Hotel Industry in Taiwan," Tourism Economics, , vol. 20(3), pages 655-664, June.
    4. Yi-Lung Lee & Shew-Huei Kuo & Mei-Yi Jiang & Yang Li, 2019. "Evaluating the Performances of Taiwan’s International Tourist Hotels: Applying the Directional Distance Function and Meta-Frontier Approach," Sustainability, MDPI, vol. 11(20), pages 1-11, October.
    5. Xiaoying Guo & Wei Wei & Yang Li & Lei-Ya Wang, 2019. "A Study of Different Types of Air Pollutants on the Efficiency of China’s Hotel Industry," IJERPH, MDPI, vol. 16(22), pages 1-13, November.
    6. Yu-Chen Lin & Chiang-Ming Chen, 2014. "Research Note: Service Quality and Market Structure in the International Tourist Hotel Industry," Tourism Economics, , vol. 20(3), pages 647-654, June.

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