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By: Eduin D.

Contreras Castañeda
CONTENTS

 Introduction
 Tree of Science
 Purpose
 Data and Methodology
 Results
 Conclusions
 References
INTRODUCTION
 Despite the large investment in
hospitality services in Tunisia,
hotel performance indicators
have continued to decline, and
have not shown any sign of
recovery over the last ten years.
 Despite the increasing number of
tourist arrivals in Tunisia, some
hotels still suffer from a
deficiency of profitability and
therefore an inability to pay
back debts. (Aissa & Goaied,
2016)
Fuente: Disponible en: https://www.google.com.co/search?q=hotels+in+tunisian&npsic
INTRODUCTION
 Out of 548 classified hotel
facilities, 333 facilities are
listed at the information
center as being in debt to
banking institutions.
 According to the ‘National
Commission for Enterprises in
Difficulty’, for the year 2010,
over 50% of companies are
from the tourism sector
(African Development Bank,
2012)

Fuente: Disponible en: https://www.google.com.co/search?q=hotels+in+tunisian&npsic


THE PURPOSE

 The purpose of this paper is to highlight the importance of


operational efficiency on hotel profitability that is
considered a major target for investors.

 This study seeks to be instrumental in identifying the


determinants of successful Tunisian hotels and thereafter
to formulate policies for improved profitability and address
the pressing challenges in these areas (Aissa & Goaied, 2016).
THE PURPOSE

• Under the
Endogenous
Factors control of hotel
management.

Hotel
Profitability
• Under the
External control of
Factors tourism decision
Aissa & Goaied, 2016
makers.
Management efficiency and hotel profitability (EFF)

THE PURPOSE Hotel Size and profitability (SIZE)

Hotel Age and profitability (AGE)

Debt and profitability (DE)

This, is one of the first studies aimed at International chain affiliation and hotel profitability (INT-CHAIN)
measuring efficiency scores and
considers the association between Management contracting and hotel profitability (MGT-CONTRACT)
productive efficiency and financial
hotel performance in the tourism All-inclusive system and hotel profitability (ALL-IN)
industry in Tunisia (Aissa & Goaied,
2016). Hotel location and profitability (SCENIC-AREA & COASTAL-AREA)

Destination attractiveness and hotel profitability (ATTRACTION)

Major risks and hotel profitability (CRISES 01 & 02)

Managerial skills and hotel profitability (EDU-GM & EDU-FM)

Management tenure and hotel profitability (TENURE)


DATA AND METHODOLOGY

They use Regression Panel Data to focus on the main


determinants of hotel profitability using unbalanced
Panel data of 27 Tunisian hotel companies covering
the period 2000-2010.

Financial statements provided data which was


collected from hotels operating in Tunisia such as
ACCOR, RIU, LAICO or IBEROSTAR.

DATA The sample includes resort and business hotels,


Aissa & Goaied, 2016 located inside and outside of scenic areas and covering
all regions.

The sample encloses also independent as well as


affiliated hotels to international chains through
different association contracts.
DATA AND METHODOLOGY

Returns On Assets (ROA) is a widely used


measure for profitability and it is frequently
used as a measure for corporate performance
(Gonzalez-Hermosillo, Pazarbasioglu, & Billings,
1997).

Measurement of ROA = (Net income/Total Assets)*100%.


hotel
ROA represents short-term financial performance
profitability of a firm by measuring how a firm's efficiently
Aissa & Goaied, 2016 creates profits using its assets during a fiscal
year. It reflects the ability of the company's
management to produce profit from the company's
assets (Athanasoglou, Brissimis, & Delis, 2008).
DATA AND METHODOLOGY

According to Baltagi (2005), Panel data give more


variability and less collinearity among the variables.

Panel data are able to control for individual


heterogeneity and for time invariant variables
whereas a cross-section data or a time series analysis
Determinants of cannot reach the same results.
hotel's
profitability
(Panel of Data)
Aissa & Goaied, 2016
DATA AND METHODOLOGY

DEA approach is used to estimate efficiency scores


for each observation. It is a convenient
benchmarking tool to evaluate and improve
operational practices of hotels (Barros, 2005).

Estimation of They assume that transformation of inputs on outputs


efficiency is made with the same technology T, defined as:

scores
(DEA)
Aissa & Goaied, 2016

(Output Y)
(Food and Beverage Cost)
(Cannot be feasibly distributed)
DATA AND METHODOLOGY
They use the Farrell/Debreu-type output-oriented technical
efficiency measure and they try to estimate efficiency score
for each hotelj (j=1…n).

Estimation of
efficiency
scores
(DEA)
Aissa & Goaied, 2016

(Charnes et al, 1978)


Efficiency score results and profitability (DEA)

37%

65%

Aissa & Goaied, 2016


Different hotels' ranking due to their
efficiency score and ROA.

Aissa & Goaied, 2016


Regression results

Aissa & Goaied, 2016


Regression results

Aissa & Goaied, 2016


Regression results
In order to improve their profitability, hotels have to ensure
high operational performance for the offered services
including accommodation, restaurants, bars, laundries,
swimming pools and conference rooms Chen and Soo (2007).

Size and hotel profitability are related. Large hotels


generate better revenues but worse corporate
performance in terms of profitability.

They find that hotels need ten years to reach their optimal
profitability. It starts to decline, after this period.

Given that these hotels present high levels of indebtedness, the


majority of Tunisian hotels generate poor profitability.

Profitability of hotels associated with international


chains is higher than independent hotels.

Aissa & Goaied, 2016


They find that four years is the optimal period for the general
manager tenure. It starts to decline, after this period.
Conclusion and policy implications

 An optimal investment should be set up using equity financing with moderate size
hotels located in attractive destinations, especially in scenic areas.
 Striving for an affiliation with an international chain and choosing to operate under
management contract, which can assure management performance by skilled
managers, is another crucial factor.
 Finally, sustaining continuous investment for amenities to maintain the
attractiveness of the hotel and increase income is essential.
 At the policy level, it is imperative that decision makers boost the country's
attractiveness and promote educational awareness in the tourist sector to enhance
hotel profitability.
 The study needs to be complemented by additional empirical studies showing the
effects of other macro and micro factors on hotel profitability (Aissa & Goaied, 2016).
References

 Aissa S. & Goaied (2016). Determinants of Tunisian hotel profitability: The role of managerial
efficiency. Tourism Management 52, 478-487.
 African Development Bank. (2012). Tunisia: Interim country strategy paper 2012-2013.
 Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008). Bank-specific, industryspecific and
macroeconomic determinants of bank profitability. Journal of International Financial Markets,
Institutions and Money, 18(2), 121-136.
 Baltagi, B. H. (2005). Econometric analysis of panel data (3rd ed.). West Sussex, England: John Wiley
and Sons, Ltd.
 Barros, C. P. (2005). Measuring efficiency in the hotel sector. Annals of Tourism Research, 32(2), 456-
477.
 Chen, C. F., & Soo, K. T. (2007). Cost structure and productivity growth of the Taiwanese
international tourist hotels. Tourism Management, 28(6), 1400-1407.
 Gonzalez-Hermosillo, B., Pazarbasioglu, C., & Billings, R. (1997). Determinants of banking system
fragility: a case study of Mexico. International Fund Staff Papers, 44, 295-314.
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