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Cost and profit efficiency: the case of Bulgarian hotel industry

Author

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  • Dora DONCHEVA

    (Trakia University, Stara Zagora, Bulgaria)

  • Dimitrina STOYANCHEVA

    (Trakia University, Stara Zagora, Bulgaria)

Abstract

The current paper aims to analyse and estimate the Bulgarian hotel industry's efficiency, focusing on both cost and profit efficiency. We attempt to examine whether service quality, as well as tourism specialization, affect hotel industry efficiency. By using the Battese and Coelli (1995) model this study applies a Stochastic frontier analysis with 309 Bulgarian hotels analysed for the period of 10 years (2008-2017). The methodology allows to be estimated the efficiency level and influencing factors, as well as decompose the error into both, random and inefficiency error. The results show that the cost efficiency decreases when the hotel category increases and significantly fluctuates over time in a decreasing tendency. On the other hand, quality service and tourism specialization cannot unambitiously explain the profit inefficiency of Bulgarian hotels. Thus, the hotel management needs to apply strategies related to differentiating hotel products and/or better pricing, rather than tourism development of the destination.

Suggested Citation

  • Dora DONCHEVA & Dimitrina STOYANCHEVA, 2021. "Cost and profit efficiency: the case of Bulgarian hotel industry," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 12, pages 190-212, December.
    • Handle: RePEc:jes:journl:y:2021:v:12(1):p:190-212
    DOI: https://doi.org/10.47743/ejes-2021-0210
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    References listed on IDEAS

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    Cited by:

    1. Goran Karanovic, 2023. "Exploring the Intrinsic Factors Influencing Return on Assets: A Case Study of the Hotel Industry in Selected EU Countries," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 16(1), pages 54-61, October.

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