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Measuring the Cost Efficiency of International Tourist Hotels in Taiwan

Author

Listed:
  • Fei-Ching Wang

    (Lecturer, Department of Hotel Management, Jin-Wen Institute of Technology, 99 An Chung Road, Hsintien City, Taipei, Taiwan, ROC)

  • Wei-Ting Hung

    (Assistant Professor, Department of Business Administration, Vanung University, 1 Van-Nung Rd, Chung-Li City, Taoyuan, Taiwan, ROC)

  • Jui-Kou Shang

    (Associate Professor, Department of Public Finance, Jin-Wen Institute of Technology, 99 An Chung Road, Hsintien City, Taipei, Taiwan, ROC)

Abstract

This study employs data envelopment analysis (DEA) to evaluate the relative cost efficiency of 49 international tourist hotels in Taiwan. The study uses five different measures: overall efficiency (OE), allocative efficiency (AE), technical efficiency (TE), scale efficiency (SE) and pure technical efficiency (PTE). Applying efficiency measures derived from the DEA estimation, hotel efficiency determinants are evaluated using the Tobit regression model. A bootstrapping technique is applied to overcome the interdependency problem of the DEA efficiency scores adopted in the regression analysis. The empirical results demonstrate that the international tourist hotel industry in Taiwan is inefficient, with most efficiency losses attributable to technical inefficiencies, of which scale inefficiencies are the primary cause – the scale of operations of international tourist hotels in Taiwan being too small to enable the cost-savings associated with larger-scale operations. The Tobit regression results indicate that the proportion of foreign individual travellers (FIT), online transaction function (WEB) and franchising (HOTELTYPE) are related to a better performance of international tourist hotels in Taiwan. The number of years a hotel has been operating (AGE) is not significantly related to any of the efficiency measures.

Suggested Citation

  • Fei-Ching Wang & Wei-Ting Hung & Jui-Kou Shang, 2006. "Measuring the Cost Efficiency of International Tourist Hotels in Taiwan," Tourism Economics, , vol. 12(1), pages 65-85, March.
    • Handle: RePEc:sae:toueco:v:12:y:2006:i:1:p:65-85
    DOI: 10.5367/000000006776387150
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    References listed on IDEAS

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