Hotel DEA Efficiency Analysis

Hotel DEA efficiency analysis applies data envelopment analysis, the linear-programming frontier method introduced by Charnes, Cooper, and Rhodes in 1978, to benchmark how efficiently hotels convert their inputs into outputs. Rather than assuming a functional form, DEA builds a best-practice frontier directly from the observed hotels and measures each property's efficiency as its distance from that frontier, handling multiple inputs such as rooms, staff, and expenses and multiple outputs such as revenue and occupancy simultaneously. Morey and Dittman brought the method into hospitality with their study benchmarking hotel general managers, showing that DEA can control for differences across properties and identify the efficient performers whose practices others can emulate. The result is a relative efficiency score, a set of peer benchmarks, and concrete improvement targets for each hotel.