۱- Introduction

۲- Theoretical framework

۳- Data and econometric model

۴- Results

۵- Conclusions and implications

References

Abstract

In this paper, we decompose hotel-sector total factor productivity growth into components attributable to changes in technical efficiency, scale effect, and technical change. The hotel-sector production Frontier is approximated parametrically using a primal approach requiring no data on output and input prices while permitting the conduction of statistical tests for the various features of the hotel-sector technology. Our empirical model relies on a flexible translog production function which allows to distinguish between Hicks-neutral and factor-biased technological progress. Using this framework, we estimate hotel-sector productivity growth and its components in a sample of 25 European countries from 2008 to 2015. Based on the empirical results, a cross-country comparison is performed and the sources of hotel-sector productivity are discussed. Finally, the implications of the study for hotel operators and policy makers are presented and a set of recommendations is developed for improving hotel sector productivity growth.

Introduction

With the service sector being the largest contributor to GDP in Europe and the productivity gap between the service-sector and the overall economy constantly increasing in the last years (Van Der Marel et al., 2016; Van Der Marel, 2017), service productivity issues have come to the fore of public and policy discussions within EU (European Commission, 2016; World Bank, 2016). Among the various service sectors, hospitality often takes a central role in controversies over how to raise the economic benefits from this specific industry which constitutes a robust source of revenues and domestic employment for many European countries. This interest on the performance of the hospitality industry has been mainly motivated from the broadly accepted view that hotel-sector productivity rates have been relatively low compared with other sectors of the economy (Witt and Witt, 1989; Johns and Wheeler, 1991; Sigala et al., 2005), and therefore the prospects for a rapid growth there might be extremely high. Driven from this view, World Tourism Organization recently placed productivity issues in tourism at the top of the research agenda in an effort to attract attention from researchers and enhance response actions from policymakers and hotel operators. Yet, despite the profound interest of EU and international tourism organizations in hotel productivity issues, research to date has not kept in pace with the current challenges and needs in the industry. Indeed, until now, little is known about the true levels of hotel-sector productivity growth in most European countries and even less has been documented. In addition, the driving factors behind hotel-sector productivity growth remain largely unexplored with important implications when it comes to the design and implementation of effective policies. Both an overall assessment and a cross-country comparison of hotel sector productivity are therefore required in order to gain insights about the overall and relative competitiveness of the hotel sector across European countries. Moreover, a separate assessment of the determinant factors of hotel-sector productivity is needed as a step towards initiating proper response actions from policymakers but also from hotel operators.