Applying the stochastic frontier approach to measure hotel managerial efficiency in Taiwan

Abstract This paper analyses the cost efficiency of Taiwan's international tourist hotel sector. A stochastic cost frontier function with three inputs (i.e. labor, food and beverage, and materials) and one output as the total revenue is specified and used to estimate hotel efficiency. The results reveal that hotels in Taiwan are on average operating at 80% efficiency. In addition, the factor of operation type significantly affects hotel efficiency, whereby the efficiency of chain hotels is higher than that of independent hotels.

[1]  Marianna Sigala,et al.  Using Data Envelopment Analysis for Measuring and Benchmarking Productivity in the Hotel Sector , 2004 .

[2]  Abraham Charnes,et al.  Measuring the efficiency of decision making units , 1978 .

[3]  Shiuh-Nan Hwang,et al.  Using data envelopment analysis to measure hotel managerial efficiency change in Taiwan , 2003 .

[4]  Paul A. Phillips,et al.  Performance measurement systems and hotels: a new conceptual framework , 1999 .

[5]  Hurvey Leibenstein.  Allocative efficiency vs. X-Efficiency , 1966 .

[6]  G. Battese,et al.  A model for technical inefficiency effects in a stochastic frontier production function for panel data , 1995 .

[7]  C. Lovell,et al.  On the estimation of technical inefficiency in the stochastic frontier production function model , 1982 .

[8]  L. Cai,et al.  Hotel Labor Productivity Assessment , 2004 .

[9]  Carlos Pestana Barros,et al.  A Stochastic Cost Frontier in the Portuguese Hotel Industry , 2004 .

[10]  Kevin Donaghy,et al.  Yield Management: An Overview , 1995 .

[11]  M. Baker,et al.  New perspectives on productivity in hotels: some advances and new directions , 1994 .

[12]  Edwin R. Stafford,et al.  The Lodging Index: An Economic Indicator For The Hotel/Motel Industry , 1991 .

[13]  Subal C. Kumbhakar,et al.  Stochastic frontier analysis , 2000 .

[14]  Sheng-Hshiung Tsaur,et al.  The operating efficiency of international tourist hotels in Taiwan , 2001 .

[15]  We Chiang,et al.  A DEA evaluation of Taipei hotels. , 2004 .

[16]  S. Eilon,et al.  Productivity measurement: A brief survey , 1973 .

[17]  W. Meeusen,et al.  Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error , 1977 .

[18]  Harold O. Fried,et al.  The measurement of productive efficiency : techniques and applications , 1993 .

[19]  R. C. Morey,et al.  Evaluating a hotel GM's performance A case study in benchmarking , 2003 .

[20]  Carlos Pestana Barros,et al.  MEASURING EFFICIENCY IN THE HOTEL SECTOR , 2005 .

[21]  Timothy Coelli,et al.  An Introduction to Efficiency and Productivity Analysis , 1997 .

[22]  Randy I. Anderson,et al.  Measuring efficiency in the hotel industry: A stochastic frontier approach , 1999 .

[23]  D. Aigner,et al.  P. Schmidt, 1977,?Formulation and estimation of stochastic frontier production function models,? , 1977 .