Improving efficiency in international tourist hotels in Taipei using a non‐radial DEA model

Abstract

PurposeThe purpose of this study is to evaluate the operational efficiency of 23 four‐ and five‐plum international tourist hotels (ITHs) in Taipei in 2006, paying attention to efficiency improvement using a non‐radial data envelopment analysis (DEA) model.Design/methodology/approachA non‐radial DEA model is proposed to improve the efficiency of inefficient hotels focusing on the output side by allowing for non‐proportional reductions in each positive input or augmentations in each positive output. The model considers four inputs (total number of rooms, total number of employees, food and beverage (F&B) capacity, and total operating cost) and three outputs (guest room revenues, F&B revenues, and other revenues); variable returns to scale are assumed.FindingsThe empirical results show that the radial and non‐radial DEA models provide not only different performance measurements for the corresponding hotels but also different benchmarks from different angles for improving efficiency.Practical implicationsHoteliers or other service providers should find this alternative DEA model helpful and more flexible in re‐examining their resource utilization and possibly reshuffling their resource pool.Originality/valueUnlike traditional DEA studies, which focus on measuring efficiency while ignoring differences among input or output variables, this study pays attention to efficiency improvement by considering changes in output with non‐proportional augmentations to improve efficiency.