Applying Difference in Difference Method to Value Policy Effect on Hotel Industry

This study applies Difference in Difference (DiD) method to evaluate the policy effect on hotel industry. This study uses the International Tourism Hotels (ITHs) in Taiwan as the subjects. The operational and managerial data of ITHs are collected from the reports by Taiwan Tourism Bureau. The data contained 70 hotel units from year 2005 to 2010. In 2008, the government relaxed the entrance limitation for the tourists from China and the number of inbound visitors has been increasing tremendously. However, our research results indicate that the open policy for visitors from China have no significant positive effect on the profitability of ITHs. Tourism policies can lead to unexpected results to different tourism industry with different operational scale, which should be taken into consideration when making business strategies or governmental policies.