Using data envelopment analysis to measure hotel efficiency in Crete

Abstract

PurposeThe purpose of this paper is to: study the relative efficiency between hotels operating under a brand and hotels operating independently, on the island of Crete, Greece; identify the inefficiency causes; and suggest managerial implications to relevant business experts and managers in order to increase hotel efficiency in Crete and in other tourism destinations with similar characteristics.Design/methodology/approachThe sample is constituted by 50 superior hotels (luxury and class A) operating in Crete in 2008: 25 hotels are operating as totally independent and 25 hotels are operating under a brand. The efficiency for the above hotels is estimated through the data envelopment analysis methodology.FindingsFirst, nationally branded hotels are relatively the most efficient; internationally branded are the least efficient, while those operating under a local brand and the independent ones lie in between. This efficiency ranking can be explained by the interplay between operating under a brand and being flexible to changes in the local market's conditions. Second, the hotels' inefficiency cause is mainly due to the input/output configuration and not due to their management teams' performance to organize the inputs in the production process.Research limitations/implicationsA direction for future research could be to enrich input and output variables. The paper could also be extended through a larger sample of hotels and an enriched data set covering more variables for more than one year, so as to study the dynamics of hotel efficiency. The larger sample could also contain hotels from other popular tourist destinations in Greece.Practical implicationsThe inefficiency causes are identified and, moreover, suggestions are made to hotel owners and managers, at the level of strategic and operational management, so as to increase hotel efficiency.Originality/valueThis is the first study measuring hotel efficiency in Greece. Moreover, it identifies the inefficiency causes of hotels and offers suggestions, at the level of strategic and operational management, so as to increase hotel efficiency, which are applicable to Crete as well as to other tourism destinations with similar characteristics.