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Archives of Business Research – Vol. 10, No. 8
Publication Date: August 25, 2022
DOI:10.14738/abr.108.12916. Ferreira, N. R. (2022). Untangling the Inefficiency of Hotel Industry: The Portuguese Teixeira Duarte Hotel Chain Analysis. Archives
of Business Research, 10(8). 133-140.
Services for Science and Education – United Kingdom
Untangling the Inefficiency of Hotel Industry: The Portuguese
Teixeira Duarte Hotel Chain Analysis
Nuno Rafael Ferreira
IBS-ISCTE IUL, Quantitative Methods, Lisbon, Portugal
ABSTRACT
In this study the technical efficiency was analyzed for four hotels of the Teixeira
Duarte Group - a renowned Portuguese hotel chain. An efficiency ranking was
established for these four Portuguese hotels units using Stochastic Frontier
Analysis. This methodology allowed discriminating between measurement error
and systematic inefficiencies, enabling the identification of the main inefficiency
causes. The results showed that distance to the airport and higher price of
accommodations promote efficiency. Additionally, hotels with many standard
rooms and sea views are likely to achieve higher levels of efficiency. These results
should be carefully considered when aiming at improving hotel's efficiency,
especially in Portuguese units with similar typology and location of the ones
considered in this analysis.
Keywords: Hotel industry; Efficiency; Stochastic Frontier Analysis (SFA)
INTRODUCTION
The tourism industry has great strategic significance for the Portuguese economy due to its
capability to generate wealth and create employment opportunities [1]. This is an economic
sector where Portugal has clear competitive advantages due to the existing high-quality
infrastructures, highly qualified human resources, natural diversity and pristine environments.
Portugal has exceptional resources in terms of geographic location, temperate climate, security,
historical and cultural heritage, high-quality beaches, biological variety (of species and
environments), and a highly competitive quality coastal touristic development.
According to [2], the Portuguese touristic market is highly segmented, with hotel groups
owning 63.8% of integrated housing units, while the remaining 36.2% belong to independent
entrepreneurs.
The hotel sector is an essential component of the tourism industry, challenged by a competitive
atmosphere managed by different pressure factors and driven by supply and demand ([3]-
GDFHTS/2010, 2010).
Teixeira Duarte (TD), a renowned Portuguese hotel chain, was founded in 1921 as a family
company and today is one of the largest Portuguese economic groups. Teixeira Duarte has a
successful trajectory established through sustainable growth in the civil construction sector.
Expanding the hotel industry in Portuguese-speaking countries consolidates its privileged
financial situation. In fact, outside Portugal, there are TD Hotels in the main cities of Angola and
Mozambique. In contrast, in Portugal, its central hotels are located in the southern region of the
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Archives of Business Research (ABR) Vol. 10, Issue 8, August-2022
Services for Science and Education – United Kingdom
Algarve region. However, several units can also be found on the coast of Alentejo (Southwest
coast) and in the centre area of the country.
(see Teixeira Duarte in the World in the homepage of Teixeira Duarte, 2016).
Despite the competitiveness and excellence displayed by the Group, it is essential to guarantee
that performance levels are improved or at least maintained. In fact, for management purposes,
maintaining efficiency involves using scarcer inputs and producing additional outputs. It also
means performing the assigned roles and preventing possible inaccuracies that can impede the
progress of industry.
In this context, this study aims to analyze the efficiency of the four TD Group hotel units based
in Portugal, namely: The Lagoas Park Hotel, the Sinerama Aparthotel, the Eva Hotel and the
Oriental Hotel, to identify factors affecting efficiency and analyze what must be altered to
promote better performances.
LITERATURE REVIEW
The efficiency analysis within the touristic hotel sector has been widely studied over the years.
Among available literature on this subject, the Stochastic Frontier Analysis (SFA) methodology
must be emphasized as a systematic approach. Authors such as [4]analyzed the estimation of
the managerial efficiency of 48 hotels in the USA during 1994. In a subsequent paper,[5] applied
both Data Envelopment Analysis (DEA) and SFA to estimate the efficiency of 31 corporate travel
management departments. Also, [6] used a one-stage SFA approach to analyze the technical
efficiency of 66 international hotels in Taiwan from 1992 to 2002 and incorporated the
Malmquist productivity index in the results. Likewise, [7] examined the cost efficiency of 55
international hotels in Taiwan using an SFA model.
The use of the SFA approach can be found in many other studies and is often combined with
different methodologies (e.g.[6];[8-10].
Different perspectives can drive the approaches to hotel industry efficiency analysis. For
example, [11] analyzed other tourist markets and the relationship between the hotel industry
and its macroeconomic contribution, e.g.[12-16]. Concerning the Portuguese hotel industry, the
efficiency analysis has been addressed by different approaches, primarily by Barros
(e.g.[17];[18];[19-20]; [21-22]and [23]).
TEIXEIRA DUARTE (TD) GROUP
The Teixeira Duarte Group currently employs more than 13,000 workers. It operates in 16
countries in seven different sectors: construction, concessions and services, Real Estate, hotel
services, distribution, energy, and automobile.
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Ferreira, N. R. (2022). Untangling the Inefficiency of Hotel Industry: The Portuguese Teixeira Duarte Hotel Chain Analysis. Archives of Business
Research, 10(8). 133-140.
URL: http://dx.doi.org/10.14738/abr.108.12916
Table 1 - The main indicators of Teixeira Duarte Group's business (the book values are
expressed in million euros. Total Equity includes non-controlled interests)
In non-consolidated terms, and in order to provide an overall view of the total activity of the
TD Group during 2014, we disclose that its operating income in the Construction sector
reached the total value of 1,027,221€, reflecting an overall slight decrease of 0.7% regarding
2013 (source: TD Annual Reports (2012, 2013, 2014)).
Disregarding new contracts that may arise, the Group has already assured business levels in
the construction sector for the foreign markets, which, despite the current adverse
circumstances of the domestic market, achieve 904,808€ for 2015; 649€ for 2016; and
339,281€ for 2017 (source: TD Annual Reports).
After the first experience in 1974 in the Algarve, the Teixeira Duarte Group resumed its activity
in the Hotel Services sector in the 1990s in Sines and currently operates 10 hotels, four of which
are located in Portugal, three in Angola and three in Mozambique, covering a total of 2,908 beds
and 1,465 rooms. TD Group's services are based on Tradition, Quality, Comfort and Kindness
(see hotel services from TD homepage, 2016).
Table 2 – Location (city and country) of the hotels of the Teixeira Duarte (TD) Group
Eva Hotel (4 star hotel) is acknowledged as a quality benchmark in Faro, both for leisure and
business stays. The hotel was recently renovated to be architectonically integrated into Faro's
historical and commercial downtown area. The Oriental Hotel, with a characteristic oriental
style, is situated in one of the most popular sun and sea Portuguese touristic destinations. The
Lagoas Park Hotel (4-star hotel) is located in one of the largest business centres of the country,
providing all conditions needed for business meetings and for leisure, given its congress centre
and its privileged location, fairly close to the beaches of Cascais, to Sintra, as well as to several
other interesting touristic sites. Sinerama Hotel (3 star hotel) is located in Bay of Sines, in the
vicinities of the Castle of Sines, and of the Vasco da Gama Museum. The hotel provides a family
and quiet environment (www.tdhotels.com/pt).
Business Indicators (Teixeira Duarte Group) 2010 2011 2012 2013 2014
Average number of workers 13036 11182 10853 12011 13261
Turnover 1380 1200 1383 1581 1680
Operating income 1445 1263 1440 1630 1716
Net debt 1067 927 990 1176 1293
Total equity 562 333 326 361 485
Total net assets 2721 2753 2767 2779 2954
Year
Hotels in Africa Hotels in Portugal
Angola Mozambique
Hotel Alvalade, Luanda Hotel Avenida, Maputo Hotel Eva, Faro
Hotel Baía, Luanda Hotel Tivoli Maputo, Maputo Hotel Oriental, Portimão
Hotel Trópico, Luanda Tivoli Hotel Beira, Beira Lagoas Park Hotel, Oeiras
Sinerana, Sines