Performance evaluation of the hotel industry in an emerging tourism destination: The case of Oman

Abstract

This study is concerned with evaluating the performance of the hotel industry in the Sultanate of Oman through a two-stage data envelopment analysis (DEA) procedure. In the first stage, DEA-bootstrap is used to estimate point and interval efficiency ratios of the hotels, identify the benchmark hotels and suggest a potential ranking. In the second stage, a truncated regression model based on the double bootstrapping procedure of Simar & Wilson (2007) is implemented to identify potential sources of hotels' operational inefficiency. In addition, an empirical approach is introduced to quantify the attractiveness of tourism destinations through a weighting scheme. The benchmarking analysis is carried out on a sample of 58 hotels, and revealed that (1) the majority of hotels in Oman are technically inefficient; (2) most of the efficient hotels are located in the capital, Muscat; (3) star rating and cultural attractions are the most important factors influencing hotels' efficiency. Practical implications of these findings are also discussed. © 2016 The Authors. 1. Introduction The sultanate of Oman is located on the southern tip of the Arabian Peninsula with, on its borders, the United Arab Emirates (U.A.E.), Saudi Arabia (S.A.), and Yemen. Oman covers an area of 309,500 km2, with rugged mountains and rocky deep-water fjords to the north, the mountains and green hills of the Dhofar region to the south, and theWahiba Sands in the center (Choufany & Younes, 2005). Lying on the Tropic of Cancer, Oman is one of the world's hot and arid regions, though part of the south of the country has a tropical climate (Fig. 1). Oman's economy is oil based, with an oil activity accounting for 30% of