Hotel Compset Analysis: Master It Like A Pro
Rahul is a budding hotelier, who is tempted to start a hospitality business immediately. He starts researching the location, searching for suppliers, starting with social media campaigns, and getting the business started. However, He forgets one thing - your competitors. Ultimately, his business fails. Don’t be Rahul, and understand the importance of hotel compset analysis.
The hospitality industry is a cut-throat industry, where the chances of success are marginal and a lot of scope for failure. Incomplete business research and a few wrong business decisions can ruin your hotel business for good.
One of the biggest mistakes an enterprising hotelier can make is to ignore their competitors, which can prove fatal. Here, we will help you understand what Hotel Compset Analysis is, and how hospitality businesses can utilize it to beat their competitors.
Hotel Compset Analysis: An Introduction
Competitive Set Analysis, or Compset Analysis for short, is an evaluation and assessment of your competitor’s services and products, for comparison and competitive purposes. Businesses compare themselves with their competitors and then try to understand how they can be ahead of their competitors.
It is essential, especially for hotels, because your competitors will cannibalize you if you are not able to perform. Especially in popular destinations, with numerous hotels in one locality, hotels need to stand out if they want to get more guests - be it in concept, pricing or amenities.
However, hotels also need to understand how their competitors are. A concept-based hostel designed for young and budget travellers obviously can’t and should not compete with a 5-star upmarket hotel, because they serve different purposes and different customers.
The main purpose of a hotel compset analysis is to give a clear picture of the hotel about where they stand, both literally and figuratively. It helps in mapping the business environment, and the strengths and weaknesses of competitors. It also helps you plan strategies to defeat them and get into the pole position in the hospitality industry.
Hotel Compset Analysis: Crucial Factors
There are several factors that hoteliers should consider while identifying their major competitors in the hotel industry. Let us analyze these factors before we dive deeper.
One of the most important factors of competitive set analysis for hotels is the size of the hotel. For example, it makes no sense for a boutique hotel to compare itself with a major business hotel chain. Obviously, the chain hotel will have more guests than you, and a bigger budget.
You, as a hotelier, should choose competitors that have a similar size, only then the comparison will be valid. If you are a 20-room boutique hotel, you can compare yourself with a 25-room one, not an 80-room hotel.
You need to identify competitors based on star ratings. Star ratings are based on a 5-point scale based on amenities and pricing. A 25-room budget hotel cannot compare itself to a 25-room semi-luxury boutique hotel. Customers have different needs and all choose hotels based on that. Your hotel compset analysis should take the star rating into consideration.
Hotels also need to compare themselves based on the property type. A hostel will never be a competitor to the resort. If you are a hotel that offers unique experiences, you will be in a different league compared to a standard hotel. Understand your niche and add competitors accordingly.
Another crucial factor for hotels is the amenities. Hotels need to compare the amenities of their property and the competitors. Try to list competitors that offer the same amenities as you. If they have a unique amenity, you can also include them, as long as you have something unique to offer as well.
Location is another crucial factor in determining your hotel’s compset analysis. For example, if you are a beach resort, you cannot add hill station resorts as your competitors. Those who want to go to the beach will not come to a hill station resort, no matter how similar are the competitors.
Hotels need to compete with those hotels that target a similar type of customer. For example, if you are a business hotel with a conference room and event hall, you should not compete with an all-inclusive recreational resort. If you are a boutique hotel, you need to understand that those who want unique experiences will be attracted towards your property, while other guests will be happy with standard offerings. You will need to devise strategies to beat your standard competitors.
How To Perform Hotel Compset Analysis
Now that we have explained the meaning of hotel competitive analysis, and the various factors involved, let us now discuss how hotels can perform compset analysis for their hotels. Here is a step-by-step guide to performing a compset analysis.
Step 1: Choose A Compset i.e Your Competitive Set
First things first, you need to choose your compset. Compset is the list of competitors in your market. For an accurate analysis, choose competitors that are similar to you in offerings and target audience.
Step 2: List The Characteristics
The next step is to list all the characteristics you are going to compare, such as location, property, amenities and room reviews. Then on a scale of 1 - 10, evaluate where each of your competitors falls in the categories.
Step 3: Average It Out
Then take the average of these values of each competitor. With this, you will get the average score of the competitor.
Step 4: Room Rates
Then you take the average room rates of the inventory. Note down the cheapest and the best expensive rates found publicly listed. For example, if you want to compare your deluxe room offerings to others, try to choose rooms of competitors that are similar to your hotel. You can get room rates from OTAs, their websites, and more. If you want to see rates of multiple hotels over several date ranges, you can use rate shopper.
Step 5: Plot The Graph
Then you need to plot the graph. On the X-axis, plot the rates and on the Y-axis, plot the value which is the average score of all properties, which was calculated in step 3.
Step 6: Analyze And Strategize
Here comes the most important part. After you plot the results on the graph, you need to also analyze the results. Through this graph, you will understand the competitive position of your hotel. Compare your pricing and value.
With these steps, you will be able to make a hotel compset analysis that will help you evaluate your position.
Read our blogs to know more about the hospitality industry. Bigfoot Hospitality is a one-stop solution for hotel revenue management and hotel marketing.