Comp Set Selection Key to Driving Strategy

REPORT FROM THE U.S.—There is a big difference between who you think your hotel should compete with and who it does compete with. When determining true competitors, you should always head toward the latter—with a healthy dose of logic, analytics and perspective guiding your way.

That was the message championed by panelists Tuesday during “Who Are My True Competitors?” a webinar presented by HSMAI University in conjunction with HotelNewsNow.com.

“Sometimes you have to understand that a 120% index is not always great or reasonable,” said Orly Ripmaster, managing director at STR Analytics, a sister company of HotelNewsNow.com. “Being better than average doesn’t necessarily mean you’re overachieving.” It might simply mean you’re in the wrong competitive set, she said.

Hoteliers must remember why they formulate competitive sets in the first place. When chosen correctly, they will help owners, GMs and revenue managers better understand their property’s “actual, honest performance” as benchmarked against competitors, Ripmaster said.

Aspirational comp sets can be helpful, but only if hoteliers are trying to keep tabs on the high end of the market, she said. The standard comp set should accurately reflect a hotel’s current level of performance.

“Make sure you’re very honest and removing all ego and removing all assumptions from that,” Ripmaster concluded.

Viewing local competitors through the guests’ eyes can be a helpful exercise, said David Bland, senior director, Hospitality & Leisure Group for Alvarez & Marsal Real Estate Advisory Services LLC.

“Know your competitors as well as they do or better. Know them through the guest eye,” he said.

Hoteliers should visit properties in their competitive sets to see what services and offerings they provide and how their hotels stack up. This is especially important coming out of the downturn, Bland said, when many properties have delayed renovations or upgrades and might no longer fit as true competitors.

From information to strategy
Even the best comp set is useless if it doesn’t translate into action, said Klaus Kohlmayr, senior director of consulting of IDeaS, a revenue management consulting company. Hoteliers should take the information they glean from comp set analyses to guide strategy using the following five steps:

1. Understand your competitors
How does a property compare to key competitors in the following measures:

Secondly, they should determine how much influence a competitor has to steer away certain accounts, Kohlmayr said.

If, for example, Hotel A is within the same five-mile radius to a local corporate account as Hotel B, they both likely will be competing for that account—hence, strong segment overlap. However, if Hotel A is only a block from the corporate headquarters and Hotel B is four miles away, Hotel B probably has less power of influence. Hotel A should respond accordingly by driving up rates for the local corporate account.

3. Evaluate products and services
After considering the most important services they offer guests, hoteliers should then determine how those services match up against the offerings of key competitors. This will allow hoteliers to determine any competitive advantages they might have in the market, as well as where their competitors rank in order from most competitive to least competitive, Kohlmayr said.

4. Research your price positioning
Any number of analytic tools—or hotel websites and online travel agencies—allow for an accurate, overall look at where a hotel’s price falls against its competitors.

5. Put it all together
Once they have compiled the necessary data, hoteliers will be better able to drive rate gains, target certain accounts, or leverage previously unseen market segments, Kohlmayr said.

Beyond the local market
“The industry is becoming more and more complex,” Kohlmayr said. Hoteliers must respond by looking outside their local markets to competitors in the broader global and online communities.

“You not only need to look at your pricing and your ranking and positioning in your hotel, but also your ranking and positioning out in the wider world,” he said. “… You also need to increasingly start looking at your reputation.”

Hoteliers must consider social media, OTAs and TripAdvisor in any comp set analysis, Kohlmayr said.

Establishing multiple comp sets can help hoteliers gauge performance on a regional or national level, Ripmaster said. If a property has an extremely large convention space, for example, it would make sense for that property to benchmark against a handful of similar properties throughout the country.