This paper summarizes the article “Hotel Industry Efficiency: An Advanced Linear Programming Examination” .The article explains how inefficient managers might not survive in efficient markets. Managers are mandated to be efficient in hotel industry because the rate of competition is imperfect; hence the only chance for company survivals in the market is being efficient (Anderson, Fok & Scott, 2000). The researches use the technique of data envelopment analysis to estimate efficiencies in the industry.
The data envelopment analysis is enhanced with the use of linear programming procedure, which measures the overall practical, allocative, and pure technical and scale efficiency levels. The DEA creates efficient limits that exemplify the minimum costs needed for a firm to achieve the desired outputs. A firm is deemed inefficient if any given input exceeds the minimum amounts in the set limits. The failure to use the best input mix in the manufacturing process by the managers results in allocative inefficiencies, while practical inefficiencies is produced by pure technical inefficiency and scale inefficiency. Failure to fully utilize the input upon allocations results in pure technical inefficiency, while failure to operate at continuous returns to scale results in scale inefficiencies (Anderson et al, 2000). The researchers are obtained from classical hotel presentation measures like classical ration analysis or collective indices of market presentations. Another example is from efficient frontier methods and performance capacities, which include the use of studies like that of Morey and Ditman that measures the overall performance of managers with the use of DEA.
In conclusion, the use of Data Envelopment Analysis (DEA) techniques in the hotel industry has proved to be better way of measuring managerial performances. The research concludes that efficient companies allocate more capitals to food and beverage tasks while the inefficient firms spend more on other hotel operations like employment of many workers and having too big rooms that result in space wastage (Anderson et al, 2000). Managers are therefore advised to spend more time on allocation of hotel capitals rather than managing the resources that are already in place within the firm.
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