Business Diversification in the Hotel Industry: A Comparative Advantage Analysis

Chia-Yu Yeh, Chiang-Ming Chen and Jin-Li Hu ()
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Chia-Yu Yeh: Department of Economics, National Chi Nan University, 1 University Road, Puli, Nantou 54561, Taiwan
Chiang-Ming Chen: Department of Economics, National Chi Nan University, 1 University Road, Puli, Nantou 54561, Taiwan

Tourism Economics, 2012, vol. 18, issue 5, 941-952

Abstract: The accepted norm of hotels generating the highest portion of revenue from their room sales does not apply in the case of Taiwan. International tourist hotels in Taiwan tend to diversify their business by expanding their food and beverage (F&B) services. According to international tourist hotels' financial statements for 1996–2008 (published by the Taiwan Tourism Bureau), almost 60% generate higher revenue from their F&B services. Drawing on the concept of comparative advantage, this study assumes that a hotel's comparative advantage depends on evaluating the profitability between the F&B departments and the lodging departments. The authors propose a simultaneous equation model with qualitative and limited dependent variables, drawing on the interactions between hotel profitability and revenue structure. The empirical results show that hotels in which F&B services contribute the majority of the revenue have a profitability advantage.

Keywords: simultaneous equation model; food and beverage services; international tourist hotels; diversification; Taiwan (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:toueco:v:18:y:2012:i:5:p:941-952

DOI: 10.5367/te.2012.0152

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