Factors Influencing Business Performance in Hotels and Restaurants

The objective of this paper is to analyze the factors that influence business performance. Business performance, measured by turnover per employee, can be influenced by internal factors in firms, external economic and demand factors, as well as geographic location and agglomeration. The hypotheses were tested using an econometric model on the basis of micro business data. The results show that business performance in hotels and restaurants is positively related to traditional explanatory variables, such as profits, level of investment of firms, productivity of hotels and restaurants in their regions, and concentration of firms. The paper focuses on two extra factors, i.e. human skills and geographic location. The study found that professional education, e.g. chef, has a positive impact on performance in restaurant businesses. Employees with higher levels of education including university students in hotel businesses also have an impact on performance. The location factor showed that hotels and restaurants situated in city centers perform better than those located elsewhere. The contribution of this paper is that by applying micro business data in hotel and restaurant branches, it allows the analysis of the detailed factors that might influence business performance. In addition, the results also allowed a comparison between hotel businesses and restaurant businesses. The implication of this research is to understand the relationship between business performance and a series of influential factors, which could eventually help tourism businesses to improve their management.