INTERNATIONAL JOURNAL OF TOURISM RESEARCH Int. J. Tourism Res.

12, 462471 (2010) Published online 18 January 2010 in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/jtr.765

The Performance of the Slovenian Hotel Industry: Evaluation Post-privatisation

1

A. Assaf1,* and Ljubica Kneevic Cvelbar2 Isenberg School of Management, University of Massachusetts, Massachusetts, USA 2 Faculty of Economics, University of Ljubljana, Ljubljana, Slovenia

ABSTRACT This study analyses the technical efciency of Slovenian hotels using the data envelopment analysis method. Multiple inputs and outputs are included in the analysis, ranging over the period 20052007. The results reveal an increase in efciency over the period analysed. The results also conrm that factors such as the hotels year in business, star rating and size are positively related to efciency variations between hotels. Copyright 2010 John Wiley & Sons, Ltd.
Received 21 June 2009; Revised 22 November 2009; Accepted 26 November 2009

Keywords: Slovenia; hotels; DEA; efciency. 1. INTRODUCTION here is a common agreement in the literature that the hospitality industry is one of the most important contributors to the tourism industry (Barros and Matias, 2006; Rodriguez and Gonzalez, 2007). Some of the direct and indirect economic impacts of the industry include the creation of employment opportunities, generation of tourism demand and improvement of a destination image. Several industry stakeholders are thus keeping a close eye at the industry, as a fall in its performance might directly impact other related

*Correspondence to: Dr A. Assaf, Assistant Professor of Tourism/Transport Economics, Isenberg School of Management, 90 Campus Center Way, 209A Flint Lab, University of Massachusetts, Amherst, MA 01003, USA. E-mail: assaf@ht.umass.edu

economic sectors. The high level of competition in the hotel industry also creates a need for high performance. Apart from competing internally, the industry also competes in the wider and highly segmented tourist accommodation market that includes motels, resorts, serviced apartments, caravan parks and hostels. The academic literature has so far responded well to this very important issue. Recently, several studies have focused on the issues of hotel performance across several international countries such as the USA, Portugal, Taiwan and Angola (Anderson et al., 1999; Barros and Matias, 2006; Chen, 2007; Barros and Dieke, 2008; Barros et al., 2009). Most of these studies have also improved the accuracy in the performance modelling of hotels. In the past, performance methods that were restricted to single input/output ratios (e.g. revenue per available room or average room rate) have failed to address the multiple input/output setting of the hotel industry. On the other hand, recently used methods such as the stochastic frontier analysis (SFA) or data envelopment analysis (DEA), can simply account for multiple hotel inputs and outputs, and as a result produce more accurate and comprehensive measures of hotel performance. Given the importance of this topic, we aimed in this study to provide a further extension to the existing literature by reecting the performance of the Slovenian hotel industry. Despite the importance of tourism in this country, no previous study has examined or explained the efciency determinants of Slovenians hotels. Several recent and current changes in this country also set the need for a careful performance analysis of this industry. The performance of Slovenian hotel companies, for instance, was traditionally under average in
Copyright 2010 John Wiley & Sons, Ltd.

Efciency of Slovenian Hotels comparison to international hotels companies or other related Slovenian industries (Kavcic , 2008). et al., 2005; Kneevic Cvalbar and Mihalic It is not until the full privatisation that took place in 2000 that hotels started to generate higher occupancy rates, following signicant investments in capital facilities. Some other positive trends that affected the industry included the growing investments in marketing and product development, and the replacement of the ex-Yugoslavian market with the more demanding Western European market. In terms of size and economies of scale, Slovenian hotels are however still considered relatively weak in comparison to other international hotel chains. The hotel industry is also still lacking internationalisation and brand image. Only few foreign hotel chains are currently present in Slovenia and similarly, Slovenian hotels, with the exception of few have not invested outside Slovenia. Thus, the Slovenian hotel industry is currently in a developing stage, and a reection on its performance would provide a further indication of the current local and international standing of this industry. The methodology used in this study also accounts for the limitations of several related studies in the area. We use the DEA-double bootstrap methodology to reect the performance of the Slovenian hotel industry. The bootstrap approach makes it possible to obtain statistical properties of the DEA method. This study also extends the use of the bootstrap approach to explain the sources of variations in efciency scores, using the double bootstrap methodology of Simar and Wilson (2007). The paper proceeds as follows. Section 2 is dedicated to the overview of the Slovenian hotel industry. Data and methodology are presented in Section 3, followed by the results in Section 4. Discussions and conclusions of the main ndings are then presented in Sections 5 and 6. 2. OVERVIEW OF THE SLOVENIAN HOTEL INDUSTRY Slovenia is a small European country with a population of 2 million, located between Eastern and Western Europe. This ex-socialist
Copyright 2010 John Wiley & Sons, Ltd.

463 republic became an independent country after the Ten day War in 1991. In 2004, Slovenia became a member of the European Union while in 2007 the country joined the European Monetary Union when the Euro was introduced as the national currency. The latter was not only possible without a countrys intense general economic development. Slovenian tourism was no exception to these general trends and became one of the most important sectors of the national economy. Tourism GDP reached EUR 1679 million in 2006, representing 5.5% of total national GDP (Zagorek et al., 2008). In 2008, 2 766 194 tourists visited Slovenia, including 8 411 688 overnight stays. Approximately 60% of international tourist arrivals involved Italian, Austrian, German, Croatian and British tourists (SORS, 2009). Most of the accommodation (more than 60%) providers in Slovenia consist of hotels. In total, there are about 210 hotels and 74 rms that deal with hotel businesses, encompassing about 35 000 beds. The average hotel size is about 170 beds or 80 rooms (Slovenian Chamber of Commerce, 2009; SORS, 2009). The capacity and quality of hotels have not increased signicantly over the last 15 years. Currently, more than 50% of all hotel properties operate at the four-star level, while approximately 40% of hotels operate at the three-star level (Kavcic et al., 2005). The transition process in the Slovenian hotel industry was inuenced by the fall in foreign tourism demand following the separation of Slovenia from former Yugoslavia in 1991. At that time the drop in visitor numbers was caused by several factors including the short war in Slovenia, the low level of brand awareness, the closeness to the Balkan crisis; the turbulent internal political and economic transition process; and the under-maturity of the Slovenian tourism product. The privatisation process in the hospitality industry was slower than other sectors of the Slovenian economy. During the privatisation process that took place in early 1990, Slovenian hotels ended up in the hands of the state and investment funds (Kneevic Cvelbar and Mihalic, 2008). At the beginning and middle of 2000, the secondary privatisation process took place and state funds withdrew from the hotel sector. They were replaced with domestic
Int. J. Tourism Res. 12, 462471 (2010) DOI: 10.1002/jtr

464
Table 1. Summary of hotel companies and hotels. Hotel chain Grand Hotel Union M hotel Hotel Zalec Istrabenz Tourism Hotels Metropol Hotels Bernardin Sava Hotels Bled Hotels Hotel Union****, Hotel Lev***** M hotel*** Hotel Zalec*** Grand Hotel Portoro*****, Hotel Slovenija****, Hotel Riviera****, Hotel Mirna****, Hotel Apollo****, Hotel Neptun**** Grand Hotel Metropol*****, Hotel Roa****, Hotel Barbara***, Hotel Lucija*** Grand Hotel Bernardin*****, Hotel Histrion****, Hotel Vile Park*** Grand Hotel Toplice*****, Hotel Villa Bled****, Golf Hotel****, Park Hotel****, Garni Hotel Jadran***, Trst Hotel***

A. Assaf and L. Kneevic Cvelbar

No. of hotel rooms 545 154 46 799 390 730 559

Destination Ljubljana Ljubljana Ljubljana Portoro Portoro Portoro Bled

Note: *** indicates three star rating. **** indicates four star rating. *****indicates ve star rating.

companies. Soon after, the Slovenian hotel market experienced a horizontal concentration. Mergers and acquisitions took place and currently few large hotel companies are in control of a signicant share in the Slovenian hotel market. New owners invested intensively in the improvement of hotel and tourism products. Foreign hotels did not show special interests in the Slovenian hotel market. Some exceptions include few hotels that are members of Best Western, one that is a member of Worldhotels, one that is part of the Austrian ATH&R, and one that has a management contract with Kempinski hotel chain. The majority of Slovenian hotel companies did not also expand into foreign markets. 3. DATA AND METHODOLOGY 3.1. Data description The data for this study included multiple inputs and outputs and was initially based on formal interviews with the top management of hotel companies, including CEOs, marketing and controlling managers. Data collection took place between June and October 2008, and covered a sample of 24 major hotels over the period 20052007. This is a balanced data set with 72 observations. The majority of hotels in the sample are part of hotel chains, with the
Copyright 2010 John Wiley & Sons, Ltd.

exception of two hotels that are independently owned (for more details refer to Table 1). The hotels are also some of the most known in Slovenia and are distributed across the three major tourist destinations in Slovenia: Slovenia capital Ljubljana, seaside destination Portoro and inland destination Bled. In Slovenia, there were 15 221 hotel rooms in year 2007. In medium and large Slovenian hotels, there are 6523 rooms. In our sample, we have 3223 rooms or 49.4% of all rooms in medium and large hotel companies. In the process of data collection we relied mainly on the available literature (Morey and Dittman, 1995; Johns et al., 1997; Anderson et al., 1999, 2000; Brown and Ragsdale, 2002; Hwang and Chang, 2003; Barros, 2004; Barros and Alves, 2004; Chiang et al., 2004; Barros, 2005a, 2005b; Sun and Lu, 2005; Wang et al., 2006; Yang and Lu, 2006; Chen, 2007; Rodriguez and Gonzalez, 2007; Reynolds and Thompson, 2007; Shang et al., 2008). Recent studies have also provided a more comprehensive review of the modern efciency studies in the area (Barros and Matias, 2006; Barros and Dieke, 2008), and thus, we do not intend to mention all these studies here. Note that data availability as well as discussions with hotel managers were also essential factors in the data collection. On the outputs side, we used room division total sales, F&B division total sales, and on the inputs side we used the
Int. J. Tourism Res. 12, 462471 (2010) DOI: 10.1002/jtr

Efciency of Slovenian Hotels

Table 2. Some operating statistics of Slovenian hotels (2007). Hotel name alec M Hotel Grand Hotel Bernardin Hotel Histrion Hotel Vile Park Grand Hotel Union Lev golf Jadran park Toplice Trst Vila Bled Grand Hotel Portoro Hotel Apollo Hotel Mirna Hotel Neptun Hotel Riviera Hotel Slovenija Barbara Grand Hotel Metropol Lucija Roza
a

465

Total room salesa 223 122 2 866 710 4 772 795 4 376 775 1 935 119 10 810 000 3 192 247 3 104 129 588 000 3 268 000 2 592 000 172 591 887 342 6 115 042 2 081 560 1 093 719 1 776 192 4 310 363 3 242 337 665 196 3 192 247 1 064 431 1 291 026

Total Food and Beverage salesa 686 460 351 002 3 530 678 3 355 125 434 775 4 488 000 1 802 113 1 825 200 29 400 3 577 724 2 466 269 4 066 715 402 1 432 720 187 184 69 686 111 551 590 665 690 249 111 471 1 802 113 190 360 155 873

Costs of materialsa 375 333 374 321 2 420 845 3 005 661 334 283 2 197 000 671 200 914 613 27 912 1 216 233 1 059 886 24 160 399 090 2 153 057 582 882 154 194 220 112 2 075 886 373 500 92 670 1 505 889 232 972 149 727

Costs of servicesa 508 888 298 670 1 596 944 1 597 957 398 846 5 323 000 1 523 000 835 803 144 409 648 127 1 354 820 129 208 331 566 1 061 022 243 121 169 811 222 780 514 223 436 552 153 182 1 999 586 309 232 257 819

No. of employees 42 57 96 76 21 204 80 86 15 115 60 15 42 103 38 11 22 73 50 8 72 19 16

All gures are in Euros.

number of rooms, costs of materials, costs of services, amortisation costs, number of employees and F&B division capacity (number of seats) (Table 2). Variables used in the second stage analysis of this paper included the hotels years in business, star rating and size. These variables are in line with previous studies in the area (Good et al., 1993; Ray and Mukherjee, 1994; Barros and Dieke, 2008). Assaf and Agbola (2009) have also recently tested the impact of the same variables on the efciency of Australian hotels, and concluded that they all lead to efciency improvement. However, as Slovenia operates in a much smaller context and in different environmental characteristics, it would be interesting to check if these ndings remain the same. The hotels years in business and star rating were determined directly from the respondents. All these three variables are hypothesised to have a positive inuence on efciency. The longer years in business, for example, is usually associated with better experience and brand reputation, while
Copyright 2010 John Wiley & Sons, Ltd.

large size is usually associated with strong economies of scale and saving power. The high star rating is also a common characteristic associated with hotels that possess high quality of services and variety of product offerings. Data on these variables as well as the input and output variables were collected mainly from hotels, and in some cases supported by data available from the Agency of the Republic of Slovenia for Public and Legal Records and Services, and the statistical ofce of Republic of Slovenia. Table 3 provides the descriptive statistics of the data. 3.2. DEA DEA is used in this study to derive the efciency estimates of Slovenian hotels. The method is well established in the literature and has been tested across several areas of the literature such as hotels (Barros and Dieke, 2008), banks (Barth and Staat, 2005) and restaurants Reynolds and Thompson (2007). Given the rich
Int. J. Tourism Res. 12, 462471 (2010) DOI: 10.1002/jtr

466
Table 3. Descriptive statistics of the data. Variable Total room sales Total Food and Beverage salesa Costs of materialsa Costs of servicesa No. of employees No. of rooms No. of restaurant seats
a

A. Assaf and L. Kneevic Cvelbar

Mean
a

SD 2 201 176 1 261 190 812 885 1 135 028 46.57 79.72 338.9

Median 2 011 774 625 075 392 084 358 232 45 113 308

Min 155 489 4 066 24 160 114 881 8 29 0

Max 10 871 000 4 488 000 3 005 661 6 593 000 204 327 1 340

2 583 097 1 126 292 832 771 833 288 57.17 138.36 378.5

All gures are in Euros. SD, standard deviation.

literature available on this method, we only focus here on the methodological formulation of DEA. The method involves the use of a linear programming (LP) formulation to construct a nonparametric frontier over the data. Efciency estimates are then derived relative to this surface. To illustrate, assume that there are data of known vector of inputs and outputs of L rms, the LP formulation that is solved for the i-th rm is as follows: max , st yim k y mk ,
k =1 L

m = 1 . . . , M, (1)

j xkn xin ,
k =1

n = 1 . . . , N,

i 0, i, k = 1 . . . , L
N M where x + , and y R + are the input and output vectors corresponding to rm i, is an L 1 vector of weights, and is a scalar. Note that will take a value greater than or equal to 1, and that -1 is the proportional increase in outputs that could be achieved by the i-th rm, with input quantities held constant. The value 1/ denes a technical efciency (TE) score that varies between 0 and 1. The above LP is solved L times once for each rm in the sample. As mentioned before, DEA is LP methodology and thus has no statistical properties or account for measurement error. This will frequently create problems, seeing that measurement errors and uncertainty are common in observed data. Simar and Wilson (1998, 1999, 2000) have recently addressed this problem and showed that it is possible to obtain statisti-

cal properties via the use of the bootstrap approach. In the case of DEA, the general aim of the bootstrap approach is to simulate the original sample B times, each time recalculating the parameter of interest that is the DEA efciency score. This will allow B estimates of the parameter, and thus makes it possible to generate an empirical distribution for the parameter of interest. The empirical distribution can then be used to construct condence intervals for the DEA efciency scores, and also to obtain other statistical properties. Simar and Wilson (1998) also suggested an improvement to their bootstrapping approach by adopting a smoothing procedure that accounts for the fact that the DEA efciency score is bounded between 0 and 1. More importantly, in a followup paper, Simar and Wilson (2007) extended their approach to account for the impact of environmental variables1 on efciency (Simar and Wilson, 2007). The importance of the Simar and Wilson (2007) procedure is that it produces with bias correction estimates for the parameters in the regression model. 4. RESULTS Table 4 presents the bootstrapped DEAvariable returns to scale results estimated for the period between 2005 and 2007. The paper uses 2000 bootstrap replications (B = 2000) in obtaining the results. It is evident from the rst column in Table 4 that TE has uctuated along the period among the
1

These are variables that are neither inputs nor outputs, but are used to mainly explain the variation in efciency scores. Int. J. Tourism Res. 12, 462471 (2010) DOI: 10.1002/jtr

Copyright 2010 John Wiley & Sons, Ltd.

Efciency of Slovenian Hotels

Table 4. Individual bootstrapped efciency results.
Hotel name Lev M Hotel Grand Hotel Bernardin Hotel Histrion Hotel Vile Park Grand Hotel Union H alec Golf Jadran Park Toplice Trst Lucija Grand Hotel Portoro Hotel Apollo Hotel Mirna Hotel Neptun Hotel Riviera Hotel Slovenija Barbara Grand Hotel Metropol Vila Bled Roza Lev M Hotel Grand Hotel Bernardin Hotel Histrion Hotel Vile Park Grand Hotel Union H alec Golf Jadran Park Toplice Trst Lucija Grand Hotel Portoro Hotel Apollo Hotel Mirna Hotel Neptun Hotel Riviera Hotel Slovenija Barbara Grand Hotel Metropol Vila Bled Roza Lev M Hotel Grand Hotel Bernardin Hotel Histrion Hotel Vile Park Grand Hotel Union H alec Golf Jadran Park Toplice Trst Lucija Grand Hotel Portoro Hotel Apollo Hotel Mirna Hotel Neptun Hotel Riviera Hotel Slovenija Barbara Grand Hotel Metropol Vila Bled Roza Year 2005 Traditional DEA 0.9592 1.0000 0.9081 1.0000 1.0000 1.0000 0.6203 1.0000 1.0000 1.0000 0.9749 1.0000 0.9669 1.0000 0.9298 0.9548 0.9378 1.0000 1.0000 0.9252 0.6875 0.6881 0.6253 0.8956 0.9909 0.8322 0.9429 0.7263 1.0000 0.6191 0.9812 0.9899 1.0000 1.0000 1.0000 1.0000 1.0000 0.9298 0.9548 0.9378 1.0000 1.0000 0.8764 0.9509 0.7066 1.0000 1.0000 0.9997 1.0000 0.9971 0.6193 0.9762 1.0000 1.0000 1.0000 1.0000 1.0000 0.8278 0.8870 1.0000 1.0000 1.0000 0.8874 1.0000 1.0000 0.7821 0.9661 0.8278 0.7548 Bootstrapped DEA 0.8977 0.8897 0.8624 0.8911 0.9609 0.9502 0.6024 0.9440 0.8984 0.9123 0.9361 0.8861 0.9197 0.9674 0.9057 0.9384 0.9227 0.9678 0.9672 0.8592 0.6687 0.6674 0.5930 0.8640 0.9547 0.7935 0.9048 0.7033 0.9334 0.5995 0.9483 0.9360 0.9516 0.8899 0.8922 0.8938 0.9674 0.9057 0.9384 0.9227 0.9678 0.9672 0.8277 0.8469 0.6842 0.9393 0.9436 0.9463 0.9434 0.9469 0.6004 0.9422 0.8974 0.9297 0.9279 0.9283 0.9279 0.7800 0.8470 0.9285 0.9354 0.8930 0.8382 0.9443 0.9419 0.6970 0.9410 0.7800 0.7360 BIAS 0.0614 0.1102 0.0457 0.1088 0.0390 0.0497 0.0179 0.0560 0.1016 0.0876 0.0388 0.1138 0.0472 0.0325 0.0240 0.0164 0.0151 0.0321 0.0328 0.0659 0.0187 0.0207 0.0323 0.0316 0.0361 0.0386 0.0381 0.0230 0.0665 0.0195 0.0329 0.0538 0.0483 0.1101 0.1077 0.1061 0.0325 0.0240 0.0164 0.0151 0.0321 0.0328 0.0487 0.1040 0.0224 0.0606 0.0564 0.0534 0.0566 0.0501 0.0188 0.0340 0.1025 0.0702 0.0720 0.0717 0.0720 0.0477 0.0399 0.0714 0.0645 0.1070 0.0491 0.0556 0.0580 0.0851 0.0251 0.0477 0.0187 LB 0.8262 0.7259 0.8120 0.7341 0.9120 0.8703 0.5741 0.8752 0.7245 0.7732 0.8898 0.7262 0.8141 0.8800 0.8636 0.9078 0.8999 0.8894 0.8918 0.7672 0.6421 0.6456 0.5535 0.8126 0.8496 0.7370 0.8379 0.6792 0.8417 0.5645 0.8811 0.8461 0.8574 0.7270 0.7271 0.7257 0.8800 0.8636 0.9078 0.8999 0.8894 0.8918 0.7434 0.6895 0.6601 0.8348 0.8362 0.8684 0.8420 0.8964 0.5809 0.9109 0.7489 0.8283 0.8269 0.8339 0.8269 0.7280 0.7997 0.8368 0.8672 0.7255 0.7785 0.8768 0.8794 0.5713 0.9037 0.7280 0.7157

467

UB 0.9577 0.9979 0.9067 0.9985 0.9982 0.9982 0.6192 0.9985 0.9983 0.9981 0.9733 0.9985 0.9652 0.9993 0.9290 0.9539 0.9370 0.9989 0.9991 0.9237 0.6865 0.6870 0.6244 0.8941 0.9898 0.8308 0.9411 0.7247 0.9985 0.6181 0.9795 0.9884 0.9983 0.9986 0.9986 0.9984 0.9993 0.9290 0.9539 0.9370 0.9989 0.9991 0.8747 0.9497 0.7053 0.9984 0.9984 0.9980 0.9984 0.9959 0.6183 0.9747 0.9986 0.9982 0.9982 0.9982 0.9982 0.8263 0.8855 0.9985 0.9979 0.9981 0.8857 0.9983 0.9980 0.7807 0.9648 0.8263 0.7537

2006

2007

Note: LB and UB represent the lower and upper bound of the condence interval. DEA, data envelopment analysis. BIAS is the difference between the original DEA score and the "Bootstrapped DEA" score.

Copyright 2010 John Wiley & Sons, Ltd.

Int. J. Tourism Res. 12, 462471 (2010) DOI: 10.1002/jtr

468
Table 5. Average bootstrapped efciency results. Year 2005 2006 2007 Original DEA 0.9208 0.9276 0.9375 Bias Corrected 0.8699 0.8782 0.8797 BIAS 0.0508 0.0479 0.0592

A. Assaf and L. Kneevic Cvelbar

LB 0.7912 0.7977 0.7973

UB 0.9194 0.9263 0.9359

Note: LB and UB represent the lower and upper bound of the condence interval. DEA, data envelopment analysis BIAS is the difference between the original DEA score and the "Bootstrapped DEA" score.

different hotels, and some hotels did not retain their position on the frontier of best practices across all years. None of the hotels is close to being fully efcient, but the efciency has increased along the period. In Table 5, we provide the yearly average efciency scores for Slovenian hotels. It is clear that there is a slight improvement in the performance of Slovenian hotels, moving from 86.99% in 2005, to 87.82% in 2007. This indicates that in 2007, the hotels are around 12.18% away from reaching the frontier of best practices. The lowest performing hotel is operating at an efciency level of 60.04%, while the highest performing hotel is operating at an efciency level of 94.69%. Relative to the second stage regression, we use the bootstrapping procedure discussed in Section 3.2 to overcome the serial correlation problem of the DEA-efciency estimates. The model at this stage can be expressed as follows: it = 0 + 1Starit + 2Sizeit + 3YOBit + it (2) where is the bootstrapped TE DEA score; Star is the star rating of the different hotels, Size is a dummy variable which takes the value of one for large hotels and zero for small hotels, YOB is a variable reecting the age of each hotel (number of years a hotel had been in business) and it is random error representing statistical noise. The estimated coefcients and standard errors for the model in Equation (2) are presented in Table 6. The model ts the data well with all estimated coefcients correctly signed, and statistically signicant at the
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Table 6. Bootstrapped second stage regression. Variable Star rating Size Years in business Constant Coefcient 0.0080* 0.0341** 0.0010** 0.7924** Standard error 0.0038 0.0064 0.0003 0.0722

** Signicant at the 5% condence level; * signicant at the 10% condence level. Note: Number of iterations = 2000.

5% and 10% level. More details about these results are provided in the next section. 5. DISCUSSIONS This paper has measured the TE of 24 major Slovenian hotels over the period 20042007. It was clear from the results that Slovenian hotels have slightly improved their efciency to reach a high average of 87.82% in 2007. Studies on other European and international countries with exception of the U.S. have reported similar or lower efciency ratings for their hotel industries (Anderson et al., 1999; Barros, 2006, Wang et al., 2006).2 Initially, this growth in efciency was expected and can be possibly related to several characteristics of the Slovenian hotel and tourism industry. A potential reason, for example, was the impact of the secondary privatisation process that recently took place in the Slovenian hotel industry. Privatisation has not only brought new owners and effective management style, but also signicant investments in hotel facilities and tourism products.
2

Note that any comparison between different studies should be taken with caution due to the differences in methods and sample characteristics. Int. J. Tourism Res. 12, 462471 (2010) DOI: 10.1002/jtr

Efciency of Slovenian Hotels Almost all hotels in our sample have recently invested intensively in capital projects. Hotel chains such as Istrabenz Turizem, for instance, have introduced spa and wellness products. Hotels Bernardin redeveloped its conference capacities and Sava Hotels expanded their food and beverage departments, golf product, as well as conference facilities. In the literature, the link between capital investments and efciency is well established, and it is likely that in the context of Slovenian hotels, these investments have had also a positive inuence on efciency. It is also worth noting that privatisation has also intensied market competition and pushed several hotels to differentiate their strategies and improve their operational performance. The increase in efciency could also be related to some positive trends in the global tourism industry in Slovenia. Over the study period, for example, factors such as the entrance of Slovenia to EU, introduction of low cost airline connection with UK and Germany, as well as improvement in the Slovenian tourism products have resulted in an overall tourism growth of around 6% (SORS, 2009). The direct impact on the accommodation industry was also evident. For instance, the average occupancy rate in three, four and ve-star rating hotels has increased by around 2% between 2005 and 2007 (SORS, 2009). Around the same period, the revenue per available room (RevPar) has also increased by around 11% (Agency of the Republic of Slovenia for Public and Legal Records and Services, 2008). Further evidences on the sources of efciency variations between Slovenian hotels were also provided from the second stage regression in this paper. Size, for example, was found to be a strong determinant of efciency. Such nding supports the hypothesis that in comparison with small hotels, large hotels possess stronger economies and can generate more operational savings. For example, most large hotels are currently offering a variety of food and beverage cuisines, spa and wellness products, conference facilities, as well as golf products. The positive relationship between star rating and efciency could also be related to the better service offerings of high-star hotels. Most of these hotels have also a higher average room rate than lower star hotels, and
Copyright 2010 John Wiley & Sons, Ltd.

469 in most cases they operate at a larger scale. In Slovenia, for example, ve-star hotels have on average approximately 40% higher average room price than four-star hotels, and four-star hotels have on average 65% higher average room price than three-star hotels (Agency of the Republic of Slovenia for Public and Legal Records and Services, 2008). In terms of cost, higher star hotels have higher xed costs than lower star hotels, but these can be simply offset by the additional revenues generated from rooms and other service outlets (Kavcic et al., 2005). Another important nding was the positive relationship between the age of hotel and TE. This nding might be related to the customer relationship and brand recognition that a hotel develops over time. Slovenian hotel companies, for instance, invested strongly over the years to improve their brand recognition in domestic market or in nearby countries such as Italy, Austria and Croatia (Konecnik, 2007). One good example, is the Istrabenz tourism hotel chain that developed a life class brand currently widely recognised in the domestic and Italian market. Older Slovenian hotels are also strategically located in destinations with a longer tourism tradition. Thus, competitive advantage for these hotels could also be related to their location. Finally, it is also worth noting that not all hotels in the sample have experienced an increase in efciency, and for some hotels the efciency has even slightly declined. However, some of these hotels are currently undergoing intensive capital investment projects, and this could have possibly affected their revenue outlets. It is true that Slovenian hotels have invested strongly in hard capital (facilities, equipment, etc.), the investment in soft capital (human resources, marketing) is an area that need further development (Roland, 2000; Domadenik et al., 2008). Other potential improvement strategies include the development of more personal contacts with customers, the introduction of a customer relationship management system, the innovation in marketing and information technology and the development of loyalty programmes. Currently, none of the Slovenian hotel companies has a research and development department to support these activities.
Int. J. Tourism Res. 12, 462471 (2010) DOI: 10.1002/jtr

470 6. CONCLUSIONS This paper has analysed the efciency of Slovenian hotels using the DEA double bootstrap methodology. Results based on multiple input and output variables indicated that the efciency of Slovenian hotels has improved over time to reach a high value of 87.97% in 2007. Each Slovenian hotel was also provided with a clear picture on its efciency standings in comparison to other competitors. In a second stage truncated regression analysis, the results then indicated that factors such as the hotel age, size and star rating have strongly resulted in efciency differences between the analysed hotels. Other environmental factors that might have affected the efciency standing of Slovenian hotels were also discussed. The study further highlighted some potential strategies that could be adopted by Slovenian hotels to improve efciency. It is also possible that future studies might undertake some more detailed case studies in order to identify other sources of inefciencies. Additional improvements to the current study might also include extending the period of study to analyse the impact of the current nancial crisis on the performance of Slovenian hotels. REFERENCES
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Int. J. Tourism Res. 12, 462471 (2010) DOI: 10.1002/jtr