Comparing Efficiency in All-Inclusive and Bed and Breakfast Hotel Businesses: a Multi-Period Data Envelopment Analysis in Turkey

Abstract

Purpose: This paper aims to understand the most efficient hotel system and why efficiency varies across years and between the two differing types of hotel businesses in Turkey. Design/methodology/approach: A data envelopment analysis (DEA) analysis was used to characterise the efficiency of all-inclusive (AI) and bed and breakfast (B&B) hotel businesses with one output (total revenue) and three inputs (labour, food and capital costs). The Malmquist approach is then used to discern changes in total efficiency (TTE) and intertemporal shifts in the efficiency frontier (technological change (Tch)). Findings: The results reveal that the AI hotel operates at 100% efficiency in the summer and year-round. The B&B hotel business operates at 89.6% with variable constant returns to scale during the summer and with 100% efficiency. The results of the Malmquist approach indicate that the total factor productivity grew in the years 2015, 2016, 2018 and 2019, while the other years were marked by inefficiency. Such increases were due to technical efficiency change (TEch) and Tch, which means that managerial and allocative efficiency (AE) were barely achieved. Slight differences were noted in the two time periods (all year and summer), suggesting that the scale of hotel businesses is prepared to operate all year round, and this calls for strategies to mitigate seasonality. Research limitations/implications: As to avenues for future research, the limitations of this study are threefold. First, the hotel businesses are not parallel in terms of the duration of their service offerings. Future research may consider including an AI hotel business that is in operation for the whole year. Second, businesses in Turkey are sceptical about sharing their data as it is considered confidential. However, to better generalise the results and encourage hoteliers to consider the positive outcomes of such analysis, the number of observations could be increased by considering more hotel businesses in both categories. Third, a mixture of data representing businesses operating in various countries may reflect if the efficiency scores vary internationally. Practical implications: Overall, AI hotel businesses are more attractive but less efficient than B&B. Furthermore, the external crisis impacts the efficiency of hotel businesses meaning that hotel managers could keep on exploring AI, perhaps educating their hosts not to waste or not offer huge quantities. Hotel managers may also need to enlarge their seasonal activities to ensure more efficiency. Social implications: Despite the intentions of AI hotel businesses to increase their profitability with a lower level of service quality, this study shows that the AI hotel business is very attractive but not so efficient due to the higher propensity of guests to consume food and beverages in excess that compromises the definition of efficiency as zero waste. AI is very attractive for family groups or those seeking the pleasure of relaxation at seaside resorts and is also very popular in Turkey. On the other hand, the B&B hotel business is more efficient but less attractive. Originality/value: The contributions of this paper are threefold. First, the authors analysed the efficiency and inefficiency of hotel businesses within nine years of operations. During this period, Turkey experienced first a tourism boom (2011–2014) followed by stagnation and subsequently a sharp decline due to political instability resulting in an (in)direct impact on tourism (2015–2019). Second, the authors compared the efficiency and inefficiency of AI and B&B hotel businesses. Third, the authors examined the effects of hotel management factors to ensure efficiency. © 2022, Yusuf Günaydın, Antónia Correia and Metin Kozak.