Abstract
Low productivity within service industries has been a major concerti, but this situation is unlikely to improve without a general change in the way productivity is measured and managed. This paper aims to illustrate the value of stepwise data envelopment analysis (DEA) for measuring and benchmarking productivity. The issues and problems regarding productivity measurement as well as the advantages of using DEA in productivity measurement are analysed. The article extends current DEA applications by developing a stepwise approach to DEA. The latter technique combines correlation and DEA analysis for developing robust models and sound productivity measurement. The advantages of the proposed methodology are illustrated by applying it to a dataset of three-star hotels in the UK. Six inputs and three outputs are identified as the factors affecting rooms division efficiency in three star hotels.