Quality and Mechanisms of Governance: the Case of Hotel Industry
Abstract: This paper relates organizational form and performance in hotel sector, particularly the guest perceived quality. We argue that the organizational choice affects the perceived quality because each organizational form alters the trade off between motivation and coordination costs and consequently their performance in terms of quality. Using a two-step regression model, we test this main hypothesis and other determining factors of the organizational choice in sample of 264 hotels which belong to the six main hotel chains operating in Spain. First-step results show that insourced hotels overcome lease and management contract hotels when monitoring cost are low and when the coordination cost are high. Once the endogeneity of the modal choice is controlled for, our second-step results suggests that coordination cost affecting quality are better solved through insourced and leased hotels than in establishments run under management contracts (four and five-star category insourced and leased hotels perform better in terms of perceived quality than equivalent management contract hotels). Moreover, recently restored buildings positively affect the perceived quality only in leasing hotels, which reflects the disputes over the maintenance of the assets arising in lease contracts.
