Performance Models

The hotel industry provides guests such services as accommodation, catering, entertainment, convention venues, social activities, and shopping. Among these services, accommodation and catering have been two main revenue sources for international tourist hotels in Taiwan since 1991. As reported by TTB (2003), these two services contributed more than 84 percent of total revenues of 56 ITHs in 2002; and catering revenues amounting to 45.93% of total revenues, had surpassed that of room revenues (38.89% of total revenues).

Therefore, it may be necessary to assess the ITH performance on various dimensions, thus guiding managerial action. In this study, we use a production approach to design three performance models, namely, managerial performance, occupancy performance and catering department performance.

The managerial performance model is to measure the managerial efficiency of hotel operations. The production model consists of four inputs: total operating expenses, the

number of employees, the number of guest rooms, and total area of the catering department;

and five outputs: total operating revenues, average occupancy rate, average room rate, average production value per employee in the catering department, and average production value of catering department (See Figure 4).

Input Factors

•Total operating expenses

•Number of employees

•Number of guest rooms

•Total area of catering division

•Total operating revenues

•Average occupancy rate

•Average room rate

•Average production value per employee in the catering division

•Average production value of catering division

Output Factors

Production Transfer

Figure 4 Managerial Performance Model

The occupancy performance model is designed to explore the operational efficiency of room departments. The production model consists of two inputs (the number of guest rooms and the number of employees in room division) and three outputs (the total operating revenues of room division, average occupancy rate, and average room rate) (See Figure 5).

Input Factors

•Number of guest rooms

•Number of employees in room division

•Total operating revenues of room division

Figure 5 Occupancy Performance Model

The catering performance model is to measure the operational efficiency of the catering departments. The production model consists of three inputs (total area of catering division,

the number of employees in the carting department and catering-related expenses) and three outputs (total operating revenues of the catering department, average production value per employee in the catering department, and average production value of the catering division) (See Figure 6).

Input Factors

•Total area of catering division

•Number of employees in catering division

•Catering-related expenses

•Total operating revenues of the catering division

•Average production value per employee in the catering division

•Average production value of the catering division

Output Factors

Production Transfer

Figure 6 Catering Performance Model

The choice of input and output variables used in the performance models can be traced to the literature (see Table 1) and the hotel operating reports are published by Taiwan Tourism Bureau (TTB). For instance, the total area of the catering department appears as an input measurement in Tsaur (2000) and Hwang and Chang (2003). Similarly, the average production value per employee in the catering division appears as an output measurement in Tsaur (2000). Information on qualitative indices including the physical-facilities-satisfaction index and the service-satisfaction index are not available. Therefore, these input/output factors are excluded from our performance model. The input and output factors used in this study are defined as follows.

Input factors

Total operating expenses (x ): the items of operation expenses of ITHs; as a whole,₁ they include salary and relating expenses, catering costs, water and electricity fuel expenses, depreciation expenses, maintenance and repair costs, rent and so forth,

measured in units of thousand NT$.

Number of employees (x ): refers to the number of individual employees who are₂ involved in the operation of ITHs, including medium- and high-ranking executives, guest rooms and catering staff, cooks, maintenance crews, and repairmen.

Number of guest rooms (x ): refers to the amount of guest rooms that can be₃ provided for rent by an ITH. Accordingly, the unit of measurement is simply ‘room’, without any subsequent adjustment being made for size or quality.

Total area of catering division (x ): refers to the total floor space used by the₄ operational units of all the ITH’s catering facilities, measured in square feet.

Number of employees in catering division (x ): refers to the number of individual₅ employees that are involved in the operation of ITHs in their catering divisions, such as the medium- and high-ranking executives, catering staff and cooks.

Catering-related expenses (x ): refers to the cost of food and beverages sold,₆ measured in NT$.

Number of employees in room division (x ): refers to the number of individual₇ employees that are involved in the operation of ITHs in the room division, such as the medium- and high-ranking executives, housekeeper and reservation clerk and front desk clerk.

Output factors

Total operating revenues (y ): the operational revenue of ITHs includes the income₁ from guest rooms, catering services, laundry, stores, attached operating income, and service fees, measured in units of thousand NT$.

Average occupancy rate (y ): refers to the ratio between the actual number of₂

guestrooms let and those available to be let.

Average room rate (y ): refers to the ratio between the income from guest rooms₃ and the actual number of guest rooms, measured in NT$/room.

Average production value per employee in the catering division (y ): refers to the₄ ratio between total revenues from the catering division and the number of employees in the catering division, measured in NT$/individual.

Average production value of the catering division (per 36 square feet) (y ): refers to₅ the ratio between total revenues from the catering division and the total floor space of catering division, measured in NT$/ (per 36 square feet).

Total operating revenues of the catering division (y ): refers to income from food₆ and beverage sales, measured in NT$.

Total operating revenues of room division (y ): refers to the income from room₇ rental, measured in NT$.