Is profitability a good proxy for efficiency? Evidence from the subsector of tour operators

Issue: 4/2017

Martina Kuncová

Department of Economic Studies, College of Polytechnics Jihlava, Tolstého 16, 586 01 Jihlava, Czech Republic; E-mail: martina.kuncova@vspj.cz

Roman Fiala

Department of Economic Studies, College of Polytechnics Jihlava, Tolstého 16, 586 01 Jihlava, Czech Republic; E-mail: roman.fiala@vspj.cz

Veronika Hedija

Department of Economic Studies, College of Polytechnics Jihlava, Tolstého 16, 586 01 Jihlava, Czech Republic, vhedija@seznam.cz
Vysoké učení technické v Brně, Fakulta podnikatelská, Kolejní 2906/4, 612 00 Brno, hedija@fbm.vutbr.cz.

The goal of the paper is to evaluate the economic efficiency of tour operators in the Czech Republic in the period 2007-2014 using data envelopment analysis (DEA) models and prove the link between economic efficiency and profitability and to find out if profitability is a good proxy for economic efficiency. Data was exported from the database Albertina CZ Gold Edition. We calculated the efficiency score using CCR (Charnes, Cooper and Rhodes) and BCC (Banker, Charnes and Cooper) models based on 3 inputs and 1 output. In the years 2007 to 2010, the efficiency score of almost all the companies was higher than 0.5; however, in years since 2011, we revealed significant differences in the efficiency of individual firms and only about 40 percent of tour operators achieved an efficiency score higher than 0.5. Using Pearson and Spearman correlation coefficients, our findings show that, in the case of the Czech tour operator market, profitability ratios do not correspond with firm efficiency. Profitability ratios are not a good proxy for economic efficiency and should not be used as the only firm criterion of performance.

Pages: 
425-440
DOI: 10.1515/revecp-2017-0022
JEL: Z31, C14, C67
Keywords: DEA model, economic efficiency, tour operators, profitability, efficiency-profitability relationship
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