EFFICIENCY OF THE MALAYSIAN HOTEL INDUSTRY: A DISTANCE FUNCTION APPROACH

This article introduces the distance function approach with both the DEA bootstrap and SF methods to examine the efficiency of the hotel industry in Malaysia. The DEA results reveal that, on average, the Malaysian hotels under investigation are 66% efficient compared with the best practices in the industry. It is also shown that large hotels are relatively more efficient than small hotels. After taking into account the differences in size and operational practices (proxies by the availability of a food and beverage operation), the average efficiency of Malaysian hotels rose to 83%. It seems also that the inclusion of a food and beverage operation is a source of inefficiency, especially for small hotels.