Unveiling the potential of hotel mergers: A hybrid DEA approach for optimizing sector-wide performance in the hospitality industry

Mergers and acquisitions (M&A) in the hospitality sector involve consolidating assets among hotels through partnerships. While data envelopment analysis (DEA) has been widely used for hotel efficiency analysis, little attention has been paid to hotel M&A. In this paper, a hybrid DEA methodology consisting of two stages is proposed to identify optimal matches among hotels to enhance sector performance. The initial stage employs an inverse Data Envelopment Analysis (IDEA) model to evaluate the maximum gains that could potentially be generated from pairwise consolidations among hotels. A DEA procedure that incorporates a standard DEA model and a greedy heuristic is developed in the second stage to identify the optimal pairs of hotel mergers. The optimal merger strategy for the entire hotel industry is determined from the complete set of hotels under consideration. The pertinence of the proposed methodology is shown through a sample of 58 hotels from the Sultanate of Oman