This guide will dive into what a competitive set is, how to define and analyze it, and why it's important for hotel sales and revenue management. We cover insights and practical tips to ensure you can effectively use competitive sets to drive revenue and outmaneuver your competition.
A competitive set, or CompSet, is a group of businesses that are considered direct competitors in a specific market. In the context of the hospitality industry, a competitive set typically includes hotels or lodging establishments that target similar customer segments, offer comparable services, and operate in the same geographical area.
The concept of a competitive set is primarily used for benchmarking purposes, allowing hotels to compare their performance metrics—such as occupancy rates, average daily rate (ADR), and revenue per available room (RevPAR)—against those of their competitors. This comparison helps identify strengths, weaknesses, and opportunities for improvement.
By comparing your hotel's key metrics against those in your competitive set, you can proximate your market position. This benchmarking helps you understand whether your pricing strategy, occupancy rates, and customer satisfaction levels are on par with industry standards.
A well-defined competitive set informs critical decisions related to pricing, marketing, and service offerings. It helps you identify trends and adjust your strategies to stay competitive.
Understanding where you stand relative to your competitors allows you to refine your market positioning. Are you perceived as a luxury option, or are you competing on affordability? Your competitive set can provide the insights needed to fine-tune your positioning.
Defining your competitive set isn't as simple as picking the hotels nearest to you. It's a strategic process that involves several factors:
Identify which market segment your hotel serves. Are you catering to business travelers, luxury vacationers, or budget-conscious tourists? Your competitive set should include hotels that target the same demographic.
While location is a significant factor, it's not the only one. In today's digital age, where customers can easily compare options online, your competitors might not be just the hotels next door. Consider hotels in nearby areas that attract the same types of guests.
Your competitive set should include hotels that offer similar amenities and services. If your hotel has a spa, pool, and fine dining restaurant, your competitive set should include other hotels with similar features, even if they are slightly further away.
Price is often a critical factor in a guest’s decision-making process. Identify hotels that are priced within a similar range as yours. However, consider not just the base rate but also how these hotels adjust pricing during high and low seasons.
Incorporate online reviews and reputation into your analysis. A hotel that consistently receives high ratings from guests is a significant competitor, even if it differs slightly in terms of price or location.
Once you’ve defined your competitive set, the next step is to analyze it. This analysis involves several methods and tools, each offering unique insights:
These tools allow you to monitor your competitors’ pricing in real-time. This information is crucial for adjusting your rates dynamically to stay competitive. Rate shopping tools can also help you identify pricing trends in your market.
Compare key performance indicators (KPIs) such as occupancy rates, ADR, and RevPAR with those of your competitive set. These metrics will help you understand where you stand in the market and highlight areas that need improvement.
The MPI compares your occupancy rate to the average occupancy rate of your competitive set. An MPI greater than 100 indicates that you are capturing a larger share of the market than your competitors.
Analyze customer reviews to identify common complaints or praises in your competitive set. This analysis can provide insights into areas where you can outperform your competitors, such as service quality or cleanliness.
Conduct visits to your competitors to assess their facilities, customer service, and overall guest experience. This firsthand knowledge can reveal strengths or weaknesses that are not apparent from online data alone.
Instead of sticking to a static competitive set, consider having multiple sets based on different factors such as seasonality, customer segment, or special events. For example, a ski resort might have one competitive set for the winter season and another for summer, focusing on event venues rather than winter sports.
Find out which hotels consider you part of their competitive set. This reverse analysis can provide surprising insights into how you are perceived in the market and might reveal competitors you hadn't considered.
With the rise of global travel platforms, local hotels might find themselves competing with international chains or even alternative lodging options like Airbnb. Including these in your competitive set can provide a more comprehensive market view.
The biggest challenge is often selecting the right competitors. Too broad a set can dilute the insights, while too narrow a set might miss important competitors. It’s essential to strike the right balance.
Markets change, and so do competitors. Regularly review and update your competitive set to ensure it remains relevant.
While data is invaluable, it’s important not to overlook qualitative factors like brand reputation or customer loyalty. A comprehensive analysis should combine both quantitative and qualitative insights.
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