Efficiency of Hotels Using Data Envelopment Analysis in Dar es Salaam, Tanzania

Abstract

This paper aims to systematically investigate the most efficient hotel(s) for benchmarking in Dar es Salaam, Tanzania. This study employed systematic Data Envelopment Analysis (DEA) to measure the relative efficiency of 50 different hotels in Dar es Salaam. The study characterized the relative efficiency using three outputs (i.e. room revenue, food and revenue and other revenue) and four inputs (number of employees, operational costs and number of guest rooms).The results revealed that 24 relatively efficient hotels could be used for benchmarking, whereas 26 had inefficient management. As an avenue for future research, this study used a dataset of one year. However, it is recommended that future studies consider a broader period of data sets e.g. 2 - 5 years, to capture the efficiency change over time. Businesses in Tanzania are skeptical about sharing their data as it is considered confidential; thus, managers and hoteliers are encouraged to be optimistic about the results implications. To improve efficiency, Tanzanian hotels must re-think marketing strategies and enlarge their seasonal activities to ensure more efficiency. To our understanding, this is the first paper to systematically report on the efficiency of city and resort hotels in Tanzania. Thus, the study has set the benchmark results and comparable methodology for future hotel efficiency studies.