Performance Benchmarking by Improved Slack-based Context-dependent DEA for the Hotel Industry in Taiwan

Statistics from the Taiwan Tourism Bureau (TTB) state that travelers to Taiwan in 2006 spent an average of 44.74% of their daily spending at hotels. Thus, the quality of services and the level of operational performance at hotels is key to the rise or fall of the tourism industry. Hotels in Taiwan can be divided into two groups: general and international tourist hotel (ITH). Between 1992 and 2006, the number of general tourist hotels decreased by 31%; the number of ITHs increased by 18.72%. This fact shows that large-scale ITHs have become the market mainstream; therefore, performance management of ITHs is an important research issue. A variety of previous studies dealing with this issue either adopt the comparison of financial indicators or apply data envelopment analysis (DEA) to compute relative efficiency values of decisionmaking units (DMU). Improving the performance of any inefficient DMU requires a comparison with the most efficient DMU. However, the lack of identification information concerning market competitors provides no new research perspective. The SBM context-dependent DEA proposed by Morita, Hirokawa and Zhu (2005) offers many options for performance improvement; yet it fails to shed light on how to identify potential competitors. Moreover, X has not yet certified the research method as feasible. The objectives of this research are listed as follows: (1) analyze operational performance of hotels in Taiwan, (2) provide reference paths for hotel practitioners to make gradual improvements, and (3) assist hotel practitioners in identifying potential competitors. The research issues are as follows: (1) improve the shortcoming of the research method proposed by Morita, Hirokawa and Zhu (2005), (2) establish a benchmark structure for all DMUs, and (3) perform empirical analysis of information obtained from the benchmark structure.