Measuring cost efficiency in the hotel sector: A case from China's Zhejiang province

This paper investigates the hotel cost efficiency in Zhejiang province by using the method of Data Envelopment Analysis (DEA). DEA is estimated with three inputs (i.e. labor, capital and materials) and three outputs (i.e. room revenue, F&B revenue and other revenues). The sample used consists of 179 hotels in Zhejiang province ranging from two-star to five-star hotels. The results reveal each hotel's technical efficiency, allocative efficiency and cost efficiency. ANOVA is utilized to detect if there exists efficiency difference between different types of hotels. It shows that hotel grade and scale appear to significantly affect hotel efficiency. However, no evidence can be found that efficiency is affected by ownership and operation type. Managerial implications are discussed at the end of the paper.