Dynamic efficiency assessment of the Chinese hotel industry

The paper introduces for the first time a totally dynamic two-stage approach to analyzing the hotel industryʹs technical efficiency at the sub-national level. The first stage uses data envelopment window analysis (DEWA) to assess regional hotel sectorsʹ technical efficiency over time. Unlike previous studies, the second stage uses a dynamic Tobit model to investigate the impact of macro contextual factors on the hotel sector efficiency. The study chooses the Chinese hotel industry during the period 2001–2006 as its application setting. The findings of the investigation indicate that the Chinese hotel industry is approaching an efficient operation in general, recovering from a major dip in 2003 resulting from the Severe Acute Respiratory Syndrome (SARS) outbreak. In addition, the study introduces a novel two-dimensional efficiency-based matrix to assess the competitive advantage of different regions of the Chinese hotel sector. The paper presents strategic market implications for hoteliers, government decision-makers, and destination management organizations. The proposed methods are applicable for situations in which an exogenous event of a destabilizing impact (e.g., SARS) does occur.