Total factor productivity growth and regional competitive analysis of China’s star-rated hotels

Abstract

This study investigates the total factor productivity (TFP) growth, technological progress, pure technical efficiency change, scale efficiency change, and mix efficiency change of star-rated hotels in China by employing a Hicks–Moorsteen index approach. The results show that the TFP of star-rated hotels in China had an annual average growth rate of 13.11%, mainly attributed to an annual average growth rate of operational efficiency of 21.85% and a mix efficiency growth rate of 13.52%. The growth rate of optimal production technology in the Western region markedly outperformed those in other regions and yet its growth rate of operational efficiency significantly underperformed. We also found that catch-up effects in the Central and Western regions were progressing in terms of operational efficiency and optimal production technology, respectively. The findings suggest that policy makers and practitioners should focus on TFP growth and its components, drawing the attention of star-rated hotels to upgrade their optimal production technology and enhance their operational efficiency as a means of improving TFP and competitiveness. Lastly, this study advances a new research perspective in efficiency assessment in the hotel industry by considering both financial and service production outputs.

A Stochastic Frontier Approach to Assessing Total Factor Productivity Change in China’s Star-Rated Hotel Industry

“…The favorable performance in terms of the star-rated hotel industry’s TFP was mainly attributable to both TEC (all years) and TC (mainly prior to 2009). TEC represents the efficiency level achieved as a result of management effort, and TC shows the difference in maximum productivity achievable adopting contemporary technology between time periods t and s (Liu & Tsai, 2018). From the results of the above, it is evident that management effort plays an important though somewhat descending role in TFP progression.…”

“…While improved performance could be achieved by improving the industry’s productivity growth, as has been commended by Barros (2006), Assaf et al (2010), M. H. Chen (2010), and Liu and Tsai (2018), vigorously developing star-rated hotels but ignoring issues related to productivity and efficiency enhancement will doubtlessly cause resource waste and mediocre performance in the future.…”

“…Star-rated hotels have been a major driver for the development of the hotel industry in China (Liu & Tsai, 2018) and the revenue generated has, on average, accounted for 74.8% of the whole hotel industry nationwide during 2005-2016 (National Bureau of Statistics of China, 2018). Besides, the Chinese government has deployed supply-side structural reforms, hoping to enhance the productivity of the service sector, including tourism (Boutler, 2018).…”

Higher tourism specialization, better hotel industry efficiency?

“…Using panel data of the hotel industry in 31 Chinese provincial regions from 2005 to 2013, Yang et al (2017) employ the DEA method to show that different regions have different efficiency performance in the various hotel market segments. Liu and Tsai (2018) investigate the total factor productivity (TFP) growth, technological progress, pure technical efficiency change, scale efficiency change, and mix efficiency change of star-rated hotels in China by employing a Hicks-Moorsteen index approach.…”

The Nature of Technological Change in the Chinese Hotel Sector

“…Regarding the Chinese hotel sector, the literature shows that specific contributions devoted to this case appeared recently (Liu & Tsai, 2018; Walheer & Zhang, 2018). Research devoted to the Chinese hotel sector mainly focuses on the macrolevel with regional and provincial scales by adopting nonparametric methods, such as data envelopment analysis (DEA).…”