Drivers of efficiency in hotels in South Africa.

Abstract

The purpose of this study was to analyse the efficiency of hotels in South Africa. By using primary and secondary sources, data were collected from 42 different types of hotels in South Africa, for the 2016 period, on a variety of parameters. A stochastic cost frontier function with three functions (i.e. labour, food and beverage, and materials) and one output as the total revenue is specified and used to estimate hotel efficiency. From the study it is clear that one structural driver, namely, ‘location’ and two executional drivers, namely, ‘hotel category’ and ‘occupancy’, significantly impacted (p < 0.05) on hotel efficiency in South Africa. The classification of drivers allows hoteliers to first work on drivers that can be changed in the short-term (executional drivers), then focus on the ones that require long-term planning (structural drivers). The results have implications for hotel managers in that if they want to improve efficiency they must manage hotel capacity and customer demand in a way that maximises revenue. The results could enhance the service data and yield management with regards to South Africa hotel efficiency.