Abstract
Previous hotel performance studies neglected the role of information entropy in feedback processes between input and output management. This paper focuses on this gap by exploring the relationship between hotel performance at the industry level and the capability of learning by doing and adopting best practices using a sample of 153 UK hotels over a 10-year period between 2008–2017. Besides, this research also fills a literature gap by addressing the issues of measuring hotel performance in light of negative outputs. In order to achieve this, we apply a novel Modified slack-based model for the efficiency analysis and Least Absolute Shrinkage and Selection Operator to examine the influence of entropy related variable on efficiency score. The Results indicate that less can be learnt from inputs than from outputs to improve efficiency levels and resource allocation is more balanced than cash flow and liquidity. The findings suggest that market dynamics explains the cash flow generation potential and liquidity. We find that market conditions are increasingly offering the opportunities for learning and improving hotel efficiency. The results report that the distinctive characteristic of superior performance in hotel operations is the capability to match the cash flow generation potential with market opportunities.
Highlights
The tourism and hotel management literature has long praised the benefits of hospitality and leisure issues on customer satisfaction levels [1] and the resulting impact on performance [2,3,4,5] but most research has been limitedly based on individual hotel performance
Despite this call for further investigation on hotel performance, and the recognition of learning processes as a key theme for improving cash flow generation [8], we identify a research gap concerning whether information entropy related-variables can lead to different performance results at the hotel level within the industry ambit
The results show that information entropy on inputs is much wider than the one of outputs, less can be learnt from inputs to improve the efficiency level in the UK hotel industry
Summary
The tourism and hotel management literature has long praised the benefits of hospitality and leisure issues on customer satisfaction levels [1] and the resulting impact on performance [2,3,4,5] but most research has been limitedly based on individual hotel performance. This research fills a literature gap by addressing the issues of measuring hotel performance in light of negative outputs, which is typical of cash-flow and liquidity related variables To this end, a novel Modified slack-based model is developed to allow better discrimination of super-efficiency scores. The negative impact of input/output joint entropy on super efficiency scores suggest that the UK hotels should be operated under a decreasing return to scale combined with a price discount policy, which would be helpful to improve efficiency level from the perspective of increase the cash flow generation potential. We conclude with implications, limitations and future research opportunities
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