CHAPTER 1 INTRODUCTION
1.2 P URPOSE AND F RAMEWORK OF THE D ISSERTATION
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With the expansion of travel activities, the demands for hotels are created. Hotels can be divided into tourist hotels and general hotels in Taiwan. Tourist hotels can provide a variety of activities, such as lodging, catering, social activity, meeting facility, shopping and amusements, which are the most critical function of the tourism industry (Tourist Bureau, 2010). According to the Regulations for Administration of Tourist Hotel Enterprises, two types of tourist hotels are distinguished: international tourist hotels and ordinary tourist hotels.
International hotels are usually four-star or five-star tourist hotels and ordinary tourist hotels are three-star tourist hotels. In general, international tourist hotels provide the better quality of service than ordinary tourist and general hotels (Chen et al., 2005). The prohibition of building tourist hotels in Taiwan was deregulated in 1977. Under the expansion of travel activities and the encouragement by the government, the number of international tourist hotels sprang up from 14 in 1970 to 64 in 2009 (Figure 1.3). In addition, 39 new tourist hotels are expected to open during the period of 2011-2017. Under the movement of internationalization, international hotel groups established international tourist hotels in Taiwan or signed cooperation contracts with Taiwan’s international tourist hotels one after another. The rising number of international tourist hotels has induced a more highly competitive market environment. Except the initial period, the average occupancy rate decreased in recent years, which means that sales earnings and performance first increased and then decreased. The average net operating profit margin is in the similar trend to the average occupancy rate (see Table 1.2). In addition, the net operating profit margins of individual international tourist hotels are significantly different from each other during the period of 2001-2009. The highest operating profit margin is 45.25% while the lowest is -135.95%. The standard deviation is 18.33%. These above faces show that individual international tourist hotels have to improve their performance in order to survive in this market. However, the average degree of market concentration and the average market share did not significantly change during the period of 2001-2009 (see Table 1.2). The above finding shows that the market structure might not the sole determinant of profitability in the international tourist hotel industry.1
1.2 Purpose and Framework of the Dissertation
The tourism industry has gradually played an important role in the economic growth in Taiwan. International tourist hotels are the most critical part of the tourism industry.
1 Since the data of ordinary tourist hotels are not available, this paper does not illustrate them.
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Therefore, this dissertation is to study the efficiency and productivity change, and to investigate the determinants of profitability in the international tourist hotel industry.
The dissertation is a collection of three separate but related papers which are devoted to the empirical studies of the international tourist hotel industry in Taiwan. In addition to the introduction in chapter 1, three papers are presented in chapters 2 to 4, respectively. Chapter 2 is to evaluate the efficiency of international tourist hotels based on the three-stage data envelopment analysis (DEA) model with the quasi-fixed input. Based on the Malmquist productivity index with the quasi-fixed and adjusted inputs, the productivity change in the international tourist hotel industry will be evaluated in chapter 3. In chapter 4, the determinants of profitability in the international tourist hotel industry will be investigated.
The last chapter summarizes the empirical results in the previous chapters and their policy implications, as well as provides suggestions for further research.
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0 100 200 300 400 500 600 700 800 900 1000
1970 1975 1980 1985 1990 1995 2000 2005 year
(million)
the number of international tourist arrivals
Source: Yearbook of Tourism Statistics, World Tourism Organization, 2009.
Figure 1.1 The Number of International Tourist Arrivals Worldwide
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
1970 1975 1980 1985 1990 1995 2000 2005 year
(million)
the number of visitor arrivals
Source: Annual Operation of the International Tourist Hotels, the Tourist Bureau, Ministry of Transportation and Communications, ROC, 2009.
Figure 1.2 The Number of Visitor Arrivals in Taiwan
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0 10 20 30 40 50 60 70
1970 1975 1980 1985 1990 1995 2000 2005 year
the number of international tourist hotels
Source: Annual Operation of the International Tourist Hotels, the Tourist Bureau, Ministry of Transportation and Communications, ROC, 2009.
Figure 1.3 The Number of International Tourist Hotels in Taiwan
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Table 1.1 The Aggregate Tourism Revenue and the Ratio of Aggregate Tourism Revenue to Taiwan’s GDP
Year The aggregate tourism revenue (US$ million) The ratio of aggregate tourism revenue to Taiwan’s GDP (%)
2001 11,484 3.91
2002 11,432 3.80
2003 9,281 2.99
2004 11,430 3.36
2005 10,957 3.00
2006 12,021 3.19
2007 11,881 3.02
2008 11,772 2.94
2009 12,385 3.28
Source: 1. Annual Survey Report on Visitors Expenditure, the Tourist Bureau, Ministry of Transportation and Communications, ROC, 2001-2009.
2. Trends in Taiwan and Survey of Travel, the Tourist Bureau, Ministry of Transportation and Communications, ROC, 2001-2009.
3. Directorate-General of Budget, Accounting and Statistics, Executive Yuan, ROC, www.dgbas.gov.tw.
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Table 1.2 The Average Occupancy Rate, the Profitability and the Market Structure in Taiwan’s International Tourist Hotel Industry
Year The average occupancy rate (%)
The average net operating profit margin (%)
The average degree of market concentration
The average market share (%)
2001 62.37 0.53 0.282 23.636
2002 62.17 0.16 0.298 25.000
2003 57.88 0.44 0.290 24.138
2004 66.41 6.33 0.290 24.138
2005 73.54 10.56 0.291 24.561
2006 70.21 9.01 0.306 25.862
2007 68.57 6.90 0.324 27.586
2008 66.26 4.96 0.315 27.119
2009 64.70 0.47 0.317 28.070
Source: Annual Operation of the International Tourist Hotels, the Tourist Bureau, Ministry of Transportation and Communications, ROC, 2001-2009.
Note: 1. The average degree of market concentration is measured by the sum of the squared ratios of revenues from each international tourist hotel to total revenues of all international tourist hotels in the same city or county.
2. The average market share is measured by the ratio of revenues from each international tourist hotel to total revenues of all international tourist hotels in the same city or county.
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