10 factors to consider before creating hotel competitive set

Hotel competitive set is one of the important indicators to review and analyze a hotel position and performance compared to its direct hotel competitors.

In a hotel competitive set, there are several aspects to measure, such as, hotel occupancy, hotel average room rate, hotel RevPar, MPI or Market Penetration Index, ARI or Average Rate Index and RGI or Revenue Generation Index.

A hotel competitive set can be analyzed on daily basis, weekly basis, and monthly basis as well as based on Year to Date result.  

By evaluating the figures thoroughly in consistency manner, it allows the hotel to monitor its performance and take action as necessary to adjust the strategies to improve the result.

There are several factors to consider when setting up a hotel competitive set.  It is important for a hotel to set relevant criteria as the based to select its direct hotel competitors. 

Generally, a hotel will choose 4 to 6 as its hotel direct competitors, and if there are more hotels to consider, then the remaining hotels can become the hotel indirect competitors.

In this writing, I will highlight 10 factors to consider prior to creating a hotel competitive set. These factors are listed in no particular order so it will depend on each hotel to choose which one is the priority factor.

1. Location

Check the number of hotels surrounding your hotel location.

• How many hotels located within proximity to your hotel? Amongst those hotels, which hotel has relevant criteria for your hotel direct competitive set?
• Do you also consider hotels with further location but have applicable criteria?

2. Star rating

• Do you select the hotel competitors based on the same Star rating classification?
• What about other hotels with different Star rating but have similar facilities to your hotel?

3. Hotel chain

The hotel chain can range from local, regional or international hotel chain.  A hotel competitive set can have a mix of different hotel chain as long as each hotel has relevant criteria as compared to your hotel.

For example, if your hotel is an international hotel chain with MICE segment as one of your hotel’s biggest revenue contribution, then you might want to also consider a local hotel chain that have similar target market and room pricing to be selected as your hotel competitive set.

4. Number of room inventory

It is suggestable to choose the hotel direct competitors that have similarity in the numbers of room inventory to your hotel.  This is to be able to have more accurate and fair performance analysis.

5. Number and capacity of meeting room

The number and capacity of meeting room will also become a significant factor in selecting the competitive set.  This will influence the type of market each hotel will focus on and target.

For example, if your hotel has 500 rooms accommodation and a spacious ballroom which can hold up to 1000 people with class room style.  Will it be relevant to compare with, for example, 200 room inventory hotels with a small ballroom to become your hotel direct competitors?

6. Target market

To select hotel competitors with similar target market can help your hotel to generate more realistic and measurable hotel performance analysis. You can review and study the trend of hotel demand to strengthen your hotel sales strategy and to justify the opportunity available to your hotel’s success.

Be sure that similar target market will also have similar buying power.  If the client’s buying power is lower than your hotel’s expected, do take into consideration on this aspect since it will impact into your hotel’s Average Room Rate.

7. Room pricing

Do some research on what other hotels room rate promoted to the market.  This will give you an indication on whether a particular hotel can be comparable to your hotel and can be included in your hotel direct competitors.

8. Hotel USPs and SWOT analysis

Identify your hotel USPs (Unique Selling Proposition) and develop SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis to help you outline your hotel competitive advantage.

9. Hotel facilities and services

Having a comprehensive hotel facilities and services can influence who your target market as well as what room rate will be offered. If other hotels have the same hotel facilities and services, it is worth to consider this hotel as part of your hotel direct competitors.

10. Type of room

• Does a hotel with all Suite room type be comparable to a hotel with mostly standard and deluxe room type to be included in the same hotel competitive set?

Different type of rooms in a hotel can result into the hotel’s ability not only to offer dynamic pricing based on room type, but also to capture range of market segment.

A hotel competitive set is usually created on the pre-opening stage which can be reviewed on yearly basis during the business plan periods.  If there are some changes in the hotel supply and demand in your city, then you might need to consider reviewing the existing hotel competitive set and make an adjustment if necessary.

Have a productive day.