Business diversification in the hotel industry: A comparative advantage analysis

Chia Yu Yeh, Chiang Ming Chen*, Jin-Li Hu

*Corresponding author for this work

Research output: Contribution to journalArticle

14 Scopus citations


The accepted norm of hotels generating the highest portion of revenue from their room sales does not apply in the case of Taiwan. International tourist hotels in Taiwan tend to diversify their business by expanding their food and beverage (F&B) services. According to international tourist hotels' financial statements for 1996-2008 (published by the Taiwan Tourism Bureau), almost 60% generate higher revenue from their F&B services. Drawing on the concept of comparative advantage, this study assumes that a hotel's comparative advantage depends on evaluating the profitability between the F&B departments and the lodging departments. The authors propose a simultaneous equation model with qualitative and limited dependent variables, drawing on the interactions between hotel profitability and revenue structure. The empirical results show that hotels in which F&B services contribute the majority of the revenue have a profitability advantage.

Original languageEnglish
Pages (from-to)941-952
Number of pages12
JournalTourism Economics
Issue number5
StatePublished - 1 Oct 2012


  • Diversification
  • Food and beverage services
  • International tourist hotels
  • Simultaneous equation model
  • Taiwan

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