Developing and testing a DEA-based index for the evaluation of value for money in the hospitality industry

Purpose The purpose of this study is to: 1) develop a brand-new index of value for money (VFM) leveraging Data Envelopment Analysis (DEA) methodology: the “DEA VFM”; 2) validate the “DEA VFM” index; 3) compare the “DEA VFM” with the Booking.com VFM index, thus demonstrating the superiority of the proposed index for managerial decision-making. Design/methodology/approach PIM-DEA software was used to develop an input-oriented DEA model with one input (i.e. the median price) and six outputs (i.e. the standardized scores of cleanliness, staff, location, facilities, free Wi-Fi, comfort) on 613 Italian hotels. Both input and outputs are based on Booking.com data related to hotels located in four different popular destinations: Rome, Florence, Milan and Venice. Findings The authors developed and validated a new index of VFM based on DEA methodology: the “DEA VFM.” The DEA VFM shows a very low correlation with Booking VFM scores, and it demonstrates a superior performance when assessing hotels’ VFM. Booking VFM essentially measures perceived value rather than the relationship between price and value. Originality/value To the best of the authors’ knowledge, this is the only and first study in the hospitality management literature that develops and validates a new index of VFM based on the DEA methodology: the “DEA VFM”. Moreover, we demonstrate the superiority of the DEA VFM index on the Booking.com VFM.