This paper analyzes the effects of tourist nationality sources on international tourist hotels’ (ITHs) cost efficiency in Taiwan and the factors affecting a tourist’s choice of a hotel. The data envelopment analysis (DEA) approach is used to compute cost efficiency scores of 61 ITHs in Taiwan during 1998-2007. The number of Asian, North American, Japanese, and local tourists has significantly positive effects on cost efficiency, but the number of overseas Chinese has a negative effect on cost efficiency. The number of tourists of other nationalities has no influence on cost efficiency. Generally, most tourists in Taiwan prefer a larger, older, and closer-to-airport hotel. This study also finds that the chain system, the number of scenic spots surrounding hotels, and the ratio of individual tourists all significantly improve the cost efficiency of ITHs in Taiwan.