This paper analyses the technical efficiency of a Portuguese state-owned hotel chain, Pousadas de Portugal, in order to investigate the chain's performance. A stochastic cost frontier model is used to generate hotel efficiency scores, assuming that efficiency is time-varying. The author investigates the efficiency and finds that the results are at best mixed, since the efficient scores are low and not time-varying. He therefore proposes an alteration of management procedures to enable an increase in efficiency, based on a governance-environment framework.
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