Total factor productivity growth and regional competitive analysis of China’s star-rated hotels

Abstract

This study investigates the total factor productivity (TFP) growth, technological progress, pure technical efficiency change, scale efficiency change, and mix efficiency change of star-rated hotels in China by employing a Hicks–Moorsteen index approach. The results show that the TFP of star-rated hotels in China had an annual average growth rate of 13.11%, mainly attributed to an annual average growth rate of operational efficiency of 21.85% and a mix efficiency growth rate of 13.52%. The growth rate of optimal production technology in the Western region markedly outperformed those in other regions and yet its growth rate of operational efficiency significantly underperformed. We also found that catch-up effects in the Central and Western regions were progressing in terms of operational efficiency and optimal production technology, respectively. The findings suggest that policy makers and practitioners should focus on TFP growth and its components, drawing the attention of star-rated hotels to upgrade their optimal production technology and enhance their operational efficiency as a means of improving TFP and competitiveness. Lastly, this study advances a new research perspective in efficiency assessment in the hotel industry by considering both financial and service production outputs.