A STUDY OF THE CRITICAL SUCCESS FACTORS THAT ARE SYNONYMOUS WITH EFFICIENT INTERNATIONAL TOURIST HOTELS IN TAIWAN by Chieh Heng Ko A thesis submitted to the University of Western Sydney in part fulfillment of the requirements for the degree of Doctor of Philosophy June, 2009 © Chieh Heng Ko Acknowledgements Without the good sense and guidance of my supervisors Associate Professor Terry Sloan and Ms. Rayka Presbury this research would have never been completed. I thank them for their timely rescue effort, and for fitting my problem into their already busy lives. I am indebted to a number of hotel managers who volunteered their valuable time to share with me about their experience to operate hotel, making data gathering an enjoyable social and learning experience. Finally, I would like to dedicate this thesis to my family with love and gratitude for their support, encouragement, patience and understanding during my study in overseas. I apologise for all my absences and for my lack of attention to all their lives. I am happy to announce they have their husband and dad back. Now it is time for us all to focus on fulfilling new dream. ii Statement of Authentication The work presented in this thesis is, to the best of my knowledge and belief, original except as acknowledged in the text. I hereby declare that I have not submitted this material, either in whole or part, for a degree at this or any other institution. ……………………………… Chieh Heng Ko June, 2009 iii Table of Contents Acknowledgements……………………………………………………………... ii Statement of Authentication………………………………………………….... iii Table of Contents……………………………………………………………….. iv List of Tables……………………………………………………………………. ix List of Figures…………………………………………………………………... xi Appendices……………………………………………………………………… xii Abstract…………………………………………………………………………. xiii Chapter One: Introduction…………………………………………………….. 1 1.1 Background to the Research………………………………………………. 1 1.2 Brief Introduction to Taiwan……………………………………………… 3 1.3 Taiwan Tourism Industry………………………………………………….. 5 1.4 Taiwan Hospitality Industry……………………………………………… 7 1.5 Taiwan Hotel Sector………………………………………………………. 7 1.5.1 Marketing Condition………………………………………………... 9 1.5.2 Hotel size……………………………………………………………. 9 1.5.3 Location……………………………………………………………... 10 1.5.4 Guests’ Nationality……………………………………….................. 10 1.5.5 Occupancy and Average Room Rates………………………………. 11 1.5.6 Management Style…………………………………………………... 12 1.5.7 Business Revenue Structure………………………………………… 12 1.5.8 Business Expenditure Structure…………………………………….. 13 1.6 Researcher’s Background in Taiwanese Hotel Sector……………………. 14 1.7 Research Objectives………………………………………………………. 1.8 Research Question………………………………………………………… 15 1.9 Overview of Research Design…………………………………………….. 16 1.10 Research Significance…………………………………………………… 17 1.10.1 Managerial Importance…………………………………………… 17 1.10.2 Academic Importance……………………………………………… 17 1.11 Structure of the Thesis…………………………………………………… 18 Chapter Two: Industry Review………………………………………………... 20 2.1 Chapter Introduction………………………………………………………. 20 2.2 Current Trends of Tourism Industry in Asia………………………………. 20 2.3 Comparison of Taiwan Tourism with Asian Countries……………………. 22 2.3.1 Number of Visitor Arrival…………………………………………... 22 2.3.2 Major Source Markets of Visitor Arrival……………………………. 23 2.3.3 Total Tourism Expenditure………………………………………….. 24 2.3.4 Length of Stay for All Inbound Visitors…………………………….. 24 iv 2.3.5 Visitor Spending Pattern…………………………………………….. 25 2.3.6 First or Return Visit…………………………………………………. 25 2.3.7 Purpose of Visit……………………………………………………... 26 2.4 Comparison of Taiwan Hotel with Asian Countries………………………. 26 2.4.1 Room Occupancy of Taiwan, Hong Kong, Singapore and Malaysia in 2004……………………………………………………………… 27 2.4.2 Average Room Rate of Taiwan, Hong Kong, Singapore and Malaysia in 2004…………………………………………………… 27 2.4.3 The Ratio of Room Revenue to Food and Beverage Revenue……… 28 2.4.4 Monthly Hotel Occupancy Rate in 2004……………………………. 28 2.5 The Competitive Environment of Taiwanese International Tourist Hotels.. 29 2.5.1 Economic Trends and Influence…………………………………….. 31 2.5.2 Social Trends and Influences………………………………………... 32 2.5.3 Political Trends and Influences……………………………………... 34 2.5.4 Technological Trends and Influences……………………………….. 34 2.5.5 Hotel Sector Competition……………………………….................... 36 2.5.5.1 Entry Barriers………………………………………………. 36 2.5.5.2 Suppliers……………………………………………………. 36 2.5.5.3 Substitutes………………………………………………….. 37 2.5.5.4 Competition…………………………………………………………... 38 2.5.5.5 Customers…………………………………………………... 39 2.6 Open Door to Chinese Tourists…………………………………………… 41 2.7 Chapter Summary…………………………………………………………. 43 Chapter Three: Literature Review……………………………………………. 45 3.1 Chapter Introduction………………………………………………………. 45 3.2 Performance Measurement………………………………………………... 45 3.3 Performance Measurement in the Hotel sector…………………………. 49 3.4 Productivity Measurement in the Hotel sector…………………………. 51 3.5 Traditional Performance Measurement…………………………………… 54 3.6 Data Envelopment Analysis (DEA)………………………………………. 59 3.7 Research Gap……………………………………………………………… 64 3.8 Critical success factors……………………………………………………. 67 3.9 The Model of Critical Success Factors in Hotel Operation……………….. 69 3.10 Limitations of Previous Models…………………………………………. 72 3.11 The Model of This Research……………………………………………... 73 3.12 Chapter Summary………………………………………………………... 76 Chapter Four: Methodology…………………………………………………… 78 4.1 Chapter Introduction………………………………………………………. 78 4.2 The Research Methodology……………………………………………….. 78 4.3 Data Envelopment Analysis (DEA)………………………………………. 80 4.3.1 The Concept of DEA………………………………………………... 80 4.3.2 Input and Output Data………………………………………………. 82 v 4.3.3 Malmquist Productivity Index………………………………………. 83 4.4 Qualitative Approach Used in This Research……………………………... 86 4.4.1 Qualitative Methods………………………………………………… 86 4.4.2 Qualitative In-depth Interview……………………………………… 87 4.4.3 Data Collection Method…………………………………………….. 88 4.4.4 Interview Protocol…………………………………………………... 89 4.5 Research Design…………………………………………………………... 91 4.5.1 Efficiency Analysis………………………………………………….. 91 4.5.2 Exploring the Factors Influencing Operational Performance……….. 91 4.5.3 Pilot Testing…………………………………………………………. 92 4.5.4 Conducting In-depth Interviews…………………………………….. 93 4.5.5 Analysis of Interview Data………………………………………….. 93 4.6 Sampling Procedure………………………………………………………. 91 4.7 Data Analysis……………………………………………………………… 94 4.7.1 Efficiency Evaluation……………………………………………….. 94 4.7.2 Critical Success Factors Leading to Hotel Performance……………. 96 4.8 Ethical Consideration……………………………………………………... 98 4.9 Chapter Summary…………………………………………………………. 99 Chapter Five: Data Envelopment Analysis (DEA) Finding………………….. 100 5.1 Chapter Introduction………………………………………………………. 100 5.2 DEA Efficiency Analysis………………………………………………….. 100 5.3 The Relationship between Operational Efficiency and Some Influence Factors…………………………………………………………………….. 105 5.3.1 DEA Adjustment According to Area……………………………….. 106 5.3.2 DEA Adjustment According to Hotel Size…………………………. 110 5.3.3 DEA Adjustment According to Hotel Age………………………….. 115 5.3.4 DEA Adjustment According to Room Rate………………………… 119 5.3.5 The Effect of Different Factors on DEA Efficiency Measures……... 123 5.4 Slack Analysis…………………………………………………………….. 125 5.5 Change of Operational Efficiency………………………………………… 129 5.6 Dividing Groups According to DEA Score……………………………….. 130 5.7 Chapter Summary…………………………………………………………. 132 Chapter Six: Interview Finding……………………………………………….. 134 6.1 Chapter Introduction………………………………………………………. 134 6.2 The Context……………………………………………………………….. 134 6.3 Critical Success Factors Leading to Hotel Performance………………….. 135 6.3.1 Owner’s Emphasis…………………………………………………... 135 6.3.2 Professional Knowledge and Experience in Hotel Management…… 140 6.3.3 Innovation and Features…………………………………………….. 148 6.3.4 Outsourcing…………………………………………………………. 154 6.3.5 Quality Employees………………………………………………….. 158 6.3.6 Training……………………………………………………………... 164 vi 6.3.7 Positioning…………………………………………………………... 170 6.3.8 Empowerment………………………………………………………. 180 6.3.9 Corporate Culture…………………………………………………… 184 6.3.10 Physical Facilities and Renovation………………………………. 190 6.3.11 Work Environment………………………………………………… 195 6.3.12 Brand………………………………………………………………. 200 6.3.13 Creative Marketing………………………………………………… 204 6.4 Other Factors Influencing Hotel’s Operation……………………………... 210 6.4.1 Land Acquisition……………………………………………. 210 6.4.2 Regional Market Characteristics and Management Difficulties……. 212 6.4.3 Food and Beverage………………………………………………….. 220 6.4.4 Chain Operation…………………………………………………….. 227 6.4.5 Number of Rooms…………………………………………………... 232 6.5 Chapter Summary…………………………………………………………. 233 Chapter Seven : Discussion……………………………………………………. 238 7.1 Chapter Introduction……………………………………………………… 238 7.2 Owner’s Emphasis………………………………………………………… 238 7.3 Professional Knowledge in Hotel Management…………………………... 243 7.4 Innovation and Features…………………………………………………... 248 7.5 Outsourcing……………………………………………………………….. 252 7.6 Quality Employees………………………………………………………... 255 7.7 Training…………………………………………………………………… 262 7.8 Position……………………………………………………………………. 267 7.9 Empowerment…………………………………………………………….. 271 7.10 Corporate Culture………………………………………………………... 276 7.11 Physical Facilities and Renovation…………………………………….. 281 7.12 Working environment……………………………………………………. 287 7.13 Brand…………………………………………………………………….. 292 7.14 Creative Marketing………………………………………………………. 297 7.15 Additional Factors……………………………………………………….. 302 7.15.1 Land Acquisition…………………………………………………. 302 7.15.2 Regional Market Characteristics and Management Difficulties….