Identifying the Optimal Combination of Hotel Room Distribution Channels: A DEA Analysis with a Balanced Scorecard Approach

Abstract

The hotel industry has experienced changes brought on by growth, customer expectations and the proliferation in the use of e-commerce and online distribution channels. Future hotel success depends on how effectively hotel revenue managers are able to manage all of the different booking channels to maximize hotel revenue. This study represents a new approach for hotels, the use of a Data Envelopment Analysis-Balanced Scorecard (DEA-BSC) model to measure efficiency of distribution channel mix as measured by balanced scorecard results. DEA-BSC was chosen for this study because while traditional business models typically focus on one performance measure like profit, DEA-BSC considers multiple metrics simultaneously (Zhu, 2014a). Inputs for this study included the percentage of rooms sold revenue of five distribution channels including C-Res/Voice, GDS, brand.com, OTAs, and property/relationship sales. Output was consolidated BSC average. Hotels (DMUs) for the study included fifty-three select service hotels managed by a hotel management company with hotels located throughout the United States. Findings indicated that the DEA-BSC model was able to use channel mix as inputs and consolidated BSC average as output to identify efficient (benchmark) hotels and inefficient hotels. Findings also provided measurement and direction regarding the gap between the hotels that were efficient vs. those that were not. The model could not provide information on whether one output was more effective than another in contributing to the success of a hotel (DMU), but findings generated by the DEA-BSC model provided each inefficient hotel (DMU) with benchmark comparison information to assist the inefficient hotel (DMU) to become efficient.