In the Hotelbrand tool, and even in our blog, we often talk about competitors. But which are the real competitors of a hotel? In this post we will try to answer this question even if, just as in the case of revenue strategies, there are different opinions on this matter.
In our case, we will be considering just the hotel industry and we will recognizing as your direct competitors only the properties which are located in your own destination.
Inspired by a Facebook post written by Luciano Scauri of SKL International Hotel Consulting , a competitor definition could be: any hotel customers can meet on their way before coming to my hotel. This is true for both internet and live searches. ”
According to this definition, we can say that a competitor is who is located in your own destination. That’s why in the Hotelbrand dashboard you will find a map showing all the nearby hotels.
However, the previous definition does not take into account some aspects that may be useful to define which your hotel’s real competitors are (and therefore which hotels need to be monitored for your revenue strategies). Scauri himself, in addition to the previous definition, states that “the principle of the competitive set definition is Asking Customers”.
What does this mean and which are the elements to be evaluated in order to properly locate the competing hotels? Here you will find the most important ones.
1 Similar category and characteristics
Theoretically speaking, a competitor is the one with which you have common characteristics. In the case of hotels, this means your competitor, apart from your destination, will also share other aspects related to the facility such as the number of stars or the category.
In an article published on Mindlabhotel.com’s blog, the Revenue Manager Nicola Zoppi argues that in addition to the location and the category, the presence of similar features is a crucial element of a hotel’s competitive set. For instance, a hotel with a SPA has to include among its competitors all those nearby health and wellness properties. The same thing applies to a hotel with a sea view or a pool. This happens because all these elements”, says Zoppi himself in his article,”are determining factors both in the hotel’s pricing strategy and in the choice of the hotel by the customer“.
Some believe that another crucial factor is represented by the size of the structure, which we can easily translate as the number of rooms. Indeed, a structure with over 100 rooms and a two-room B&B cannot be trated in the same way.
The matter becomes even more complicated if, instead of a B&B, your structure is a hotel with a few dozen rooms: is it right to include the structure with 100 rooms among your competitors even if you have the same number of stars?
Obviously, those structures that are as big as yours are more easily attributable to your competitors list, as they not only have similar characteristics for the quantity and quality of the offered services, but also for the type of relationship with its customers and the marketing strategies that have been used.
Another useful factor when identifying your real competitors is the price, that’s to say the cost applied to the rooms. The reason is quite obvious: customers who choose to go to a “low-cost” hotel will hardly ever go to a much more expensive hotel. Sometimes the opposite is true as well: if a person is willing to spend a high price to stay in a hotel with certain amenities, he probably won’t opt for a cheaper solution if this does not guarantee the same kind of treatment.
This is certainly one of the main reasons why it is important to know which the cost applied by your nearby hotels is. By comparing your rate to the one of the competing properties, which is what a rate checker such as Prized does, you will not only be able to understand whether you are charging too high or too low in relation to the other hotels you are monitoring, but you will also be able to figure out what your real competitors are.
Pricing is therefore what makes it possible to understand what are the structures that belong to your own market for potential customer targeting.
Another great way to find your real competitors is by selecting those structures that enjoy a reputation similar to yours. In other words, let’s go back to what Scauri called “Asking Customers” even though in this case guests are not directly asked, but they are monitored through the reviews they publish on Google, Expedia or Tripadvisor.
This is what Habout of Hotelbrand does, the other digital intelligence tool available on our online platform. It allows you to track the brandscore of your hotel, compared to your competitors’ one. However, what exactly is a brandscore? It is the average score obtained by your hotel on online reviews posted by users: it is though a fairly reliable indicator used to evaluate the brand reputation of your property.
5 Occupancy Level
According to some revenue managers, during the identification of your competitors, you should also take into account the sales performance of your hotel. According to this statement, the properties that have similar amount of bookings can be defined as your competitors!
This obviously requires a specific analysis of the occupancy level. The key concepts are related to some parameters that are used in the Revenue Management field to define the price of your rooms.
The three most important ones are: the Occupancy Rate, the RMC (Average Revenue per Room), and finally the RevPAR (Revenue Per Avaible Room). The first figure, the Occupancy Rate, is calculated by dividing the number of rooms occupied by the number of rooms available multiplied by one hundred. The second one, instead, is the ratio between the turnover and the number of rooms occupied. Finally, the RevPar can be obtained by dividing the turnover by the number of available rooms.
Let’s consider a hotel that has 60 rooms sold at the price of 100 euros per night: if the hotel had 40 occupied rooms, the RevPaR would be 40 * 100/60 = 66, 6. By increasing the number of sold rooms, the RevPar will tend to increase up to a maximum of 100 (when the number of sold rooms is equal to the number of available rooms).
Obviously, in order to know the occupancy rate and the RevPar of your property, you just need to analyse your bookings. Calculating the goals reached by your competitors could be a little bit more difficult by using this approach since, even if you get to know the number of available rooms and their prices, it could turn out to be impossible to know the real occupied rooms and their income.
There are many tricks to find out this data about your competitors, such as counting the number of cars in the parking lots or sending them fake booking requests.
On the contrary, Hotelbrand’s team suggests that you use a rate checker such as Prized in order to analyse any price change of your property as well as for your competitors. Even though you do not know the real occupancy rate of the properties, you might get useful information about the sales performance of your competitors by comparing the price variation over time.