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Efficiency evaluation of hotel chains: a Spanish case study

Author

Listed:
  • Yaguo Deng

    (Universidad Carlos III de Madrid)

  • Helena Veiga

    (Universidad Carlos III de Madrid
    Instituto Universitário de Lisboa)

  • Michael P. Wiper

    (Universidad Carlos III de Madrid)

Abstract

The tourism industry, in particular the hotel sector, is a highly competitive market. In this context, it is important that an hotel chain operates efficiently if it wants to improve or maintain its market position. The objective of this work is to compare the relative efficiency of hotel chains operating in Spain. To do this, we have designed a stochastic frontier model to measure revenue efficiency as a function of various different inputs such as total staff or number of rooms. Given that chains vary considerably in size, both inputs and outputs are normalized by an appropriate size measure. In contrast to most previous work, we account for heterogeneity in hotel chains by introducing relevant variables, such as the proportion of hotels in the chain with three stars or fewer, into the efficiency term of the stochastic frontier model. Our results suggest that in the Spanish case, in the period of the economic crisis, hotel chains increase overall revenue by investing in fewer, big hotels rather than more, small hotels. Furthermore, in terms of revenue efficiency, it appears better for hotel chains to invest in hotels of three or fewer stars than in higher star rated hotels. Finally, there is no clear evidence of a relationship between the size of a hotel chain and its efficiency.

Suggested Citation

  • Yaguo Deng & Helena Veiga & Michael P. Wiper, 2019. "Efficiency evaluation of hotel chains: a Spanish case study," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(2), pages 115-139, June.
    • Handle: RePEc:spr:series:v:10:y:2019:i:2:d:10.1007_s13209-019-0188-6
    DOI: 10.1007/s13209-019-0188-6
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    References listed on IDEAS

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    2. Francisca J. Sánchez-Sánchez & Ana M. Sánchez-Sánchez, 2024. "Evaluating the efficiency and determinants of mass tourism in Spain: a tourist area perspective," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 23(1), pages 111-145, January.

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    More about this item

    Keywords

    Bayesian inference; Efficiency; Heterogeneity; Revenue function; Stochastic frontier analysis;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • Z30 - Other Special Topics - - Tourism Economics - - - General

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