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.
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.
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.
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.
