Portugal has been experiencing a continuous growth in tourism activity, with hospitality
industry as one of the main tourism sectors. Therefore, the assessment of hotel companies’ performance is
very important to assist decision processes. The purpose of this paper is to assess the financial performance
(FP) of 570 hotel companies operating hotel units in Portugal in 2017. To explore the question of brand
affiliation, a comparison was made between hotel companies with similar stars rating and market orientation.
In addition, this paper intends to fill a gap in literature studying the Portuguese reality on the subject of brand
affiliation.
Design/methodology/approach – The present study uses a methodology based on data envelopment
analysis (DEA) to assess the overall performance for each company, which further decomposed into the
within-group performance and the technological gap. The performance of the hotel company is assessed
through the aggregation of multiple financial indicators using the composite indicator (CI) derived from the
DEA model. A bivariate analysis based on the Tobit regression to test the robustness of brand effect on FP of
hotel companies (HC) was also included.
Findings – The empirical results show that branded companies, on average, have significantly better
overall FP than non-branded companies. On the one hand, the brand effect tends to improve the within-group
FP of HCs and the brand presents a statistically significant positive effect on the FP. On the other hand, the
best practices are observed in both branded and non-branded companies.
Practical implications – The results of this study illustrate that, globally, the better FP of the branded
companies is because of their individual relative companies’ performance and a better model of operation
given by the brand effect. Brand affiliation will generally allow for a better FP and essentially a better
profitability for invested equity, a higher return on sales and a higher value added per employee.
Originality/value – The study provides important theoretical and practical contributions that can assist
the strategic decision of the HCs in choosing to operate independently or to adopt brand affiliation. Also, it is
innovative because the FP of branded and non-branded HCs is measured not using a set of individual
financial ratios but through a single CI that aggregates those financial ratios, using a DEA model.
