You’re always competing for bookings with other accommodation providers in and around your area. For this reason, competitor analysis plays a vital part in any hotel’s sales strategy.
Whether you operate a 10-bedroom guesthouse or a booming hotel with two restaurants and 100 bedrooms, you need to know who your competition is to win business.
Fortunately, competitive pricing in the hospitality industry is much easier to participate in today thanks to revenue management tools. It starts with identifying your competitive set (compset), assessing your rates relative to your market, and then deciding where you want to be positioned. Once the hard part is done, a yield manager can take over from there, monitoring competitor activity for you and automatically adjusting your rates to ensure you’re always winning the market.
Keep reading for tips on how to identify your competitors and how to build an accurate hotel compset.
What is Rate Shopping?
Before the advent of hotel technology, hotel staff and revenue managers would make routine calls to nearby hotels posing as potential guests to inquire about rates and availability in order to benchmark their room rates. Nowadays, it’s easier to check competitors’ rates on online travel agencies like Booking.com to position your rates accordingly.
Yet, this still poses a major challenge as competitors constantly change their pricing. They might do it once a month, once a week or even several times a day, thanks to tools such as channel managers. With a property to run and guests to take care of, who can dedicate the time to do this tedious manual task?
This is where a revenue management tool and yield manager comes in handy. For example, RoomRaccoon’s CompSet Revenue Manager will monitor competitor rates for you, displaying pricing data on an easy-to-use interactive dashboard so you can track your hotel’s performance against your competition.
This allows you to identify pricing trends, position your rates against competitors, and set yield rules to automatically adjust your pricing in response to changes in market conditions.
What is a hotel competitive set?
A competitive set (compset) is a group of three or four hotels that customers are comparing you against when choosing where to book. Identifying your competitive set is important because it tells you more about the properties you’re competing against and how to win over business from them.
It’s like interviewing for a job. If you know there are other candidates and know what skills they possess then you can easily position your own skills to let the hiring manager choose you over them.
Similarly, if you know which hotels travellers often consider alongside yours, you’ll have a better understanding of what actions to take to convince travellers to book with you.
To identify your CompSet you may ask yourself the following:
- Which hotels have similar prices?
- Which hotels offer similar amenities (pool, spa, restaurant)?
- Which hotels have the same star rating?
- Which hotels are targeting the same market segment as you (corporate travellers, leisure travellers)?
- Which hotels offer similar room types as you (suites with sea views)?
How to identify your hotel’s compset?
The firsts step to choosing your hotel compset is by identifying three properties that directly compete with you for business. It’s true that there are many accommodation properties online and it’s hard to choose just three. But, even the Hilton has competitors!
With the help of these five factors, you can find direct competitors and compare your offerings with theirs.
You don’t have to look too far when you do your competitor analysis. In fact, the properties nearest to yours are usually your biggest rivals because they share proximity to points of interest that attract travellers. Think about popular activities or tourist hot spots near you. If your property offers great views of a lagoon or mountain, look at other properties that use that as their unique selling point too.
2. Property Amenities
The amenities at your hotel will attract different types of travellers. If you have a meeting room, bar, and fitness centre then you’ll likely cater to business travellers. Alternatively, if you have a swimming pool and on-premise activities then you’ll likely cater to families and leisure travellers. This is important to note because your biggest competitors target the same segments as you with similar amenities.
3. Room Quality
Travellers tend to compare hotels with similar room categories and in-room extras like a Nespresso machine or free Netflix. Better quality room images on your hotel booking engine or booking channel plus better amenities will produce a higher perceived value of the property.
4. Star Ratings
Travellers can filter properties by star ratings on booking channels like Booking.com. It goes without saying that you should look at hotels with a similar star rating as yours when you identify your compset.
The tie-breaking rule between properties with similar locations, property amenities, room quality and star ratings is usually guest reviews. For this reason, it’s important to manage your property’s online reputation so that peer influence is always in your favour.
How to use a revenue management tool to track your hotel’s compset?
Most modern property management systems have an integrated hotel compset tracking tool. Using RoomRaccoon Hotel Management System as an example, we’ll demonstrate how you can track your hotel compset and earn more revenue.
In RaccoonRev, you will be asked to provide three competitors for your compset. The system pulls real-time competitor rates and availability from Booking.com and displays an overview of your local market segments. As shown below, you can see the average rates per accommodation, and the rates your competitors charge per room type. You can easily see on which days your competitors are sold out.
Once you’ve built your compsets in RaccoonRev, you can then set up rules that auto-adjust your prices when competitors change their rates. These rules can be based on whether specific conditions have been met. For example, if one competitor is sold out then your average rate should increase by 5%.
Do you know how your competitors’ room rates compare with yours? If you’re not monitoring their rates, you’re at a distinct disadvantage. That’s because travellers perceive the price as the second most important factor when booking accommodation, and it’s a safe bet your competitors are aware of this too and are performing their own competitive analysis.
If you’d like to see firsthand how this tool can give your property a competitive advantage and increase your revenue, simply book a demo and we’ll do the rest!