FACTOR ANALYSIS OF PERFORMANCE AFFECTING THE HOTEL

PROFITABILITY IN DAVAO CITY

An Undergraduates Thesis

Presented to the Faculty of the

College of Accounting Education

Eñola, Cristine Jade

Maco, Jessie
Milan, Nicole Jilliane

Adviser:

Lord Eddie I. Aguilar, CPA, MBA

June 2024
 INTRODUCTION
Background of the Study

One of Davao City's fastest-expanding economic sectors is the hotel industry.

Davao hotels alone are a multi-million-peso industry that is still growing in Davao.

However, despite the hotels' increasing popularity as urban tourist destinations,

certain hotel challenges influence both the number of visitors and the amount of

revenue the business makes. For instance, one of the main issues of the Davao hotel

industry is the issue of competition. The best and most renowned hotels, including

Apo View Hotel Davao, Marco Polo Hotel Davao, and Insular Century Hotel Davao,

are in fierce competition with one another. With this, the hotel owners in Davao today

have several accesses to strategies and factors that boost commercial competition.

Even though this trend has significantly benefited Davao City's hotel industry in

general, hotel owners still struggle to run profitable operations, which emphasizes the

importance of further evaluation of service quality (Anonymous, 2021).

Moreover, competition, particularly in the hotel industry, focuses on the "total

value" provided with the services. Thus, it is essential to evaluate the various

dimensions of the value (Santoro, 2015). Aside from this, Pnevmatikoudi and

Stavrinoudis (2016) stated that many authors think performance is essential for an

organization's business strategy, competitive position, and economic sustainability.

Furthermore, "performance and its measurement are the key success factors for every

tourism enterprise."

Performance measurement is highly significant due to the environment's

increasing rivalry. The approach of performance measurement enables management to

make decisions that are appropriate for the hotel industry and enhance company

performance (Shariff & Sharma, 2019). In 2021, a study was conducted by Bhat and
Sharma in which exploratory factor analysis and confirmatory factor analysis

followed by structured equation modeling were employed to examine the data. The

empirical findings show a strong foundation and achieves an excellent data fit.

According to empirical findings, service innovation has an influential impact on

market performance. However, the researchers believe that service quality is not the

only factor that contributes to an improvement in business performance, and a number

of additional factors may also favor business performance, as it has several different

dimensions. In fact, only a few aspects of corporate performance may be influenced

by service quality (Nair & Choudhary, 2016). In addition, according to the study

conducted by Nguyen et al. (2019), there are a lot of factors that may affect the hotel

industry, either within or outside the business. The external factors affecting the hotel

industry are the tourism business market, travel space and support services, political

institutions, infrastructure, and tourism security. On the contrary, there are also

internal factors such as financial capacity, enterprise human resources, and enterprise

leadership. Additionally, one factor that may affect the profitability of the business is

customer satisfaction. The higher the level of customer satisfaction, the more

customer loyalty, which leads to greater profits. Aside from that, customer satisfaction

with the service provided by the hotels can also increase profitability through positive

recommendations to their colleagues (Kim, n.d).

Lastly, research studies on the hospitality industry have pointed out the

positive impacts of service innovation on the profitability and long-term success of

hotels across a broad spectrum of geographic locations (Damanpour et al., 2009;

Durst et al., 2015; Zhou et al., 2005). However, only a few studies in tourism have

explicitly discussed service innovation (Bhat & Sharma, 2021).

Conceptual Framework

This study has shown a schematic model depicting the multidimensionality

and functionality of performance affecting the hotel’s profitability. This model

exhibits multiple factors or determinants that influence or impact the performance

affecting the hotel profitability of the specified locale. Moreover, the factors denoted

as Factor 1, ….n characterize the determinant attributes of the latent constructs. At the

center is the main variable, surrounded by the hypothesized determinants.

F1

F2
Fn

Determinants of
Performance
Affecting the Hotel
Profitability

F5 F3

F4

Figure 1. The conceptual framework shows the hypothetical dimension of

performance affecting the hotel's profitability.

Objective of the Study

 The key thrust of the study is to develop a measurement scale for the hotel

industry performance affecting hotel profitability in Davao City. Specifically, it aims

to realize the following objectives:

1. To identify the determinant factors of performance affecting the hotel's

profitability.

2. To develop a framework that characterizes the factors of performance

affecting the hotel profitability in Davao City.

 METHODOLOGY

Research Design

This study aims to use quantitative research methods through a descriptive

statistics such as means and variance analysis in (Yellapu, 2018). This method will

aid in summarizing the data and describing the collected samples numerically or

visually, providing a more in-depth understanding of all the factors that influence the

profitability of a hotel's business. Furthermore, this study aimed to demonstrate the

significant impact of interdependence of factors affecting business profitability by

using Exploratory Factor Analysis (EFA).

References

Anonymous. (2021). Exploring the Prestigious Hotels of Davao. [Online]

Available at:

https://www.philippinesinsider.com/mindanao/davao/exploring-the-

prestigious-hotels-of davao/?

fbclid=IwAR2oflxd8KZkEtXoD8s2vhAAgMPBU4NnvsA5tACbBatjav2bByr

I3OvQD0 [Accessed 17 Septemer 2023].

Bhat, D. A. R. & Sharma, V. (2021). Dimensionality and Consequences of Service

Innovation: An Empirical Study of Hospitality Industry. [Online]

Available at:

https://www.tandfonline.com/doi/full/10.1080/23311975.2021.1924931

[Accessed 17 September 2023].

Kim, D. -Y. (n.d). Customer Satisfaction, Profitability, and Firm Value in the

Hospitality Industry: An Application of American Customer Satisfaction

Index (ACSI). [Online] Available at"

https://www.academia.edu/67648970/Customer_satisfaction_profitability_and

_firm_value_in_the_hospitality_industry_An_application_of_American_custo

mer_satisfaction_index_ACSI_ [Accessed 17 September 2023].

Nair, G. K. & Choudhary, N. (2016). The Impact Of Service Quality On Business

Performance In Qatar Based Hotel: An Empirical Study. [Online] Available

at: https://scholarworks.umass.edu/cgi/viewcontent.cgi?

article=1386&context=jhfm&fbclid

=IwAR3WdWC4yeW2JiuRGmqPi4xJRTHdh3TzQrlv8E65wqBz-

4ReUiOb8qy-xKI [Accessed 17 September 2023].

Nguyen, T. L. H., Nguyen, N. T. & Nguyen, V. C. (2019). Identifying Factors

Influencing on the Profitability of Tourist Enterprises: Evidence from

Vietnam. [Online] Available at:

https://www.growingscience.com/msl/Vol9/msl_2019_147.pdf [Accessed 17

September 2023].

Santoro, G. (2015). Evaluating Performance in the Hotel Industry: An Empirical

Analysis of Piedmont. [Online] Available at:

https://vtechworks.lib.vt.edu/bitstream/handle/10919/85572/Evaluating

%20performance%20in%20the%20hotel%20industry.pdf?

sequence=2&isAllowed=y [Accessed 17 September 2023 ].

Shariff, F. & Dr. Sharma, M. P. (2019.) Performance Measurement in Hotel Industry

– Review of Literature. [Online] Available at:

https://www.jetir.org/papers/JETIR1907E52.pdf. [Accessed 17 September

2023].

Pnevmatikoudi, K. & Stavrinoudis, T. (2016). Classification of Hotel Performance

Measurement Indicators. [Online] Available at:

https://ejtr.vumk.eu/index.php/about/article/download/214/217/737 [Accessed

17 September 2023].

Yellapu, V. (2018). Descriptive Statistics. [online] ResearchGate. Available at:

https://www.researchgate.net/publication/327496870_Descriptive_statistics.