The Impact of Market Volatility on Hotel Efficiency in Malaysia

Investment Rating - The report does not explicitly provide an investment rating for the hotel industry in Malaysia. Core Insights - The study finds that smaller hotels are more efficient in dealing with market volatility compared to larger hotels, with a significant positive impact of higher volatility on the efficiency of smaller hotels and a negative impact on larger hotels [11][37] - The research highlights that higher women's ownership in hotels contributes to better handling of volatility, indicating a gendered effect on hotel efficiency [12][52] Summary by Sections Introduction - The hotel industry in Malaysia experiences significant market demand volatility, which affects occupancy rates and operational efficiency [8] - The paper investigates how hotel size influences efficiency in the context of market volatility, suggesting that smaller hotels are more adaptable [8][9] Literature Review - Previous studies indicate mixed results regarding the impact of demand volatility on hotel performance, with many finding negative effects [9][15] - The relationship between firm size and efficiency has been explored, with smaller firms generally exhibiting greater flexibility in response to market changes [18][19] Methodology - The study employs Data Envelopment Analysis (DEA) to measure hotel efficiency, focusing on input-oriented models and variable returns to scale [20][22] - The analysis uses a nationally representative sample of private hotels in Malaysia, with 90 hotels included in the baseline sample [25] Results - A one standard deviation increase in occupancy rate volatility is associated with a 14.2% increase in efficiency for smaller hotels (25th percentile) and an 18.1% decrease for larger hotels (75th percentile) [11][37] - The interaction between hotel size and volatility is statistically significant, indicating that smaller hotels benefit from volatility while larger hotels suffer [37][40] Robustness Checks - The findings are robust across various efficiency measures, including bias-corrected and super efficiency models [39][40] - Alternative measures of hotel size and volatility confirm the main results, reinforcing the conclusion that smaller hotels are better equipped to handle market fluctuations [41][43] Extensions - The report explores the impact of volatility on scale efficiency, finding a negative relationship that is significant across specifications [48] - It also examines the differences between women-led and men-led hotels, revealing that higher women's ownership correlates with a less adverse impact of volatility on efficiency [52]