As with any other industry, conducting a competitive set analysis is crucial in the hospitality industry. This involves comprehending and assessing the products and services offered by your competitors to compare them with your own offerings. By doing so, you can make informed strategic decisions.
To get a clear picture of your hotel compset analysis, you need to start with the following steps:
- Define your goals for competition, such as attracting more guests or increasing prices for greater revenue, or improving services compared to competitors.
- Figure out what data you need to collect from your competitors so that you can use it for decision-making for various aspects of your business.
- Identify which hotels are your direct competition and collect the data that you require. A long list of such hotels should be cut down to a minimum number to extract your final hotel compset.
- Set up milestones to track your progress.
Identifying the right Compset
First, you need to frame a competitive set of about 3 to 5 hotels serving a similar kind of guest segment as yours. You should target a leisure property in your locality if you are a leisure property. If you serve business travelers, select hotels in the same category. Even the most unique properties and the top-of-the-league hotels have rivals. This means a healthy compset analysis is required by every hotel in the industry. On the other hand, if you believe you have more than 5 competitors, it is still suggested that you narrow down to 5 of them to get a clear perspective of things. You can eliminate those properties that are located far away and include the ones close to you in your compset. You can further the narrowing down process in several other ways.
You need to consider the following aspects to identify the right hotel compset for your business:
- Location- Properties in the closest proximity to yours are your main competitors as they attract all guests coming to your region.
- Amenities - Your biggest competitors are those that offer similar property amenities as yours. They target the same customers as you and offer similar on-site amenities such as restaurant, park, meeting spaces, shuttle services, swimming pool, etc.
- Room quality and services - Guests tend to compare properties featuring similar rooms and bed configurations. If you have an edge over better quality rooms amenities, then it is likely to give your property a higher perceived value.
- Reviews - An important deciding-factor for choosing among similar properties is reviews. Properties with higher and positive reviews should be included in your compset. This is why it is said that you must manage your hotel’s reputation if you want to gain stardom in the industry.
- Pricing - Hotels having a similar rate card as yours are your toughest competitors and must be included in the final list of your hotel compset.
- Positioning - Include hotels that position themselves in a way that is identical to yours. Identify your position as midscale, Budget, or Luxury and include similar properties.
- Size - Size of the hotel is yet another competitive factor. If you are a boutique hotel, then it is senseless to compare yourself with a luxury chain of resorts. Opt for competing with properties that are of similar size as yours.
- Target guests - Identify the target guests of your hotel, whether business class, leisure or both. If the majority of your guests are business guests, add hotels with a similar guest list to your compset.
Significance of identifying the right compset
Analyzing hotel compset holds great significance for hoteliers. Here are some of the most evident important reasons that hotels opt for this analysis:
- It allows you to assess your strengths and weaknesses in as compared to your peers
- It allows you to benchmark your brand and its position in the market
- It gives you an understanding of the correct pricing of your property
- It initiates smooth and right decision-making for competitive advantage
- It allows you to craft strategies to prevent new competition from entering the market
- The insights help you to improve your services and products
- It shows your unique selling points that you should focus on
Methods Used To Analyze Compset Effectively
Here is a series of steps that you can follow to perform strategic competitor analysis for your hotel:
- Choose your competitive set - Once you have figured out the long list of competitors, you need to trim the list and narrow it down to over 5 of them to get your Hotel Compset.
- Note down the characteristics - Go ahead and make a list of all the characteristics that will serve as the basis of comparison. These characteristics can include evaluation factors such as property location, property size, amenities, guest reviews, etc. Rate each of your competitor on a scale of 1 to 10 with regards to each characteristic.
- Get the average score - Then take the average score of each competitor by considering the total score of the characteristic list.
- Pricing - Take out the average pricing of rooms of the inventory. Take note of the most expensive and the cheapest rates that are listed publicly. E.g. compare the deluxe room pricing of your hotel with that of other hotels. You can know their rates from competitor websites.
- Plot the graph - Go ahead and lot the graph. Plot the rates on the X-axis and the average score of each competitor should be there on the Y-axis.
- Analyze - Once you have plotted the graph, analyze the results. You can understand the competitive position of your hotel with this graph. Then compare your value and pricing.
Importance of Hotel Compset
Once you have the right compset in hand, go ahead and bring a positive enhancement to your revenue with several analyses including:
The data of your compset can give huge pricing benefits to your hotel business. As you know you can get the pricing data from sources such as competitor websites, meta search engines, online travel agencies, etc, you can compare these prices to formulate your own pricing strategies. You can decide whether you have to increase or decrease the price or keep it the same as the average selling price of your compset. The idea is to monitor the competition to identify the rates that will enhance your business.
Swot analysis helps you to identify your Strength, Weaknesses, Opportunities, and Threats (SWOT). Once you have defined your hotel compset, you need to figure out certain aspects of your competitors such as room types, total offerings, number of rooms, amenities offered, etc. Now compare your hotel with theirs on the basis of these aspects. Now create opportunities for your business strengthening yourself against your competitor’s weaknesses. Prepare necessary strategies to get an edge in your industry by comparing yourself with your compset.
Yet another intrinsic part of competitive analysis of hotels, review analysis helps you figure out the reasons why your competitors are loved by customers. Browse through OTAs, search engines, travel websites, etc, to get a grab on what customers think of your competitors. Examine those reviews and understand the plus-points and flaws of your rivals and use it to your advantage.
Automating tools for analyzing hotel compset
There is a constant challenge to analyze pricing of hotels as the pricing of hotels is highly volatile depending on seasons and various other factors. This makes it difficult to manually keep a track of the changing rate card of your competitors. It is here that technology comes to the rescue with its compset analysis tools and software that aid in the automation and optimization of the analysis process.
Hotel compset analysis tools like Axis Rooms help to monitor competitor rates. The dynamic price data can be seen on an interactive dashboard that gives you current insight of the required data. It further helps to track your hotel’s performance and revenue generation. Such tools largely help in identifying pricing trends, rate positioning against compset, understanding market trends, and guest preferences.
Revolutionizing the hotel industry with revenue management software
What was once a luxury for a big chain of hotels, today is accessible and affordable to a larger spectrum of players in the hospitality industry. Now you have easy-to-use intelligence software like Axis Rooms that has brought a wave of revolution in the market. Integrated with various features of a sound Property Management System, this tool offers all the important features of a foolproof hotel compset analysis to lead to effective pricing and revenue management strategies.
In a nutshell, hotel compset analysis is invaluable and imperative to your hotel’s customer acquisition strategy. It also helps to determine your property’s brand position in the market. Once you have evaluated your competitor’s services and pricing, you must take a strategic decision to rate your own services appropriately, whether by enhancing amenities, improving guest-facing services, and by increasing rates.