One of the usual tasks in Revenue Management is analysing competitors' prices.
But there is a problem.
Not every hotel near us is really our competitor.
Choosing our competitive set — the group of comparable hotels — incorrectly can lead us to make the wrong decisions.
Location matters, but it is not everything
It makes sense to start by analysing properties close to our hotel.
However, distance should not be the only criterion.
Two hotels on the same street can target completely different customers.
For example, a budget property aimed at workers on assignment may compete little with a boutique hotel aimed mainly at couples, even if they are only 200 metres apart.
What should we analyse?
To build a competitive set we should look at several characteristics.
Category and service level
A one-star hotel should not normally be compared directly with a four-star one.
However, we should not look only at the official category either.
The quality perceived by the guest also matters.
Customer type
We need to understand which segment each property attracts.
It could be:
- corporate;
- leisure;
- groups;
- families;
- couples;
- workers on assignment;
- international travellers.
Hotels that compete for the same customers tend to be especially relevant.
Services
Parking, breakfast, pool, restaurant, gym or 24-hour reception can significantly change the value proposition.
Online reputation
Guest reviews have a direct impact on a hotel's ability to defend certain prices.
A property with excellent reviews can justify higher rates than one with a weaker reputation.
Room types
We must also check that we are comparing similar products.
It would make no sense to compare a standard room without breakfast with a superior room that includes breakfast and free cancellation.
Don't copy prices
Once our competitors have been identified, the goal is not to imitate their rates.
Competition is a source of information, not a strategy.
We should ask ourselves:
Why is that hotel charging more?Why is it lowering its rate?Is it practically full?Does it have an active promotion?Does it have better reviews?Does it offer any additional service?
Decisions must combine market information with our own data.
The competitive set changes too
A hotel's competitors do not always have to be the same.
A hotel may compete with certain properties on weekdays and with others at weekends.
New hotels may also appear, or changes of category or renovations may alter each property's position.
That is why the competitive set should be reviewed periodically.