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Competitive set for hotels: how to create one and why it’s critical in revenue management

Publication Date: May 2024

One of the key tools to implement an effective revenue management strategy is to build and operate a competitive set. But what exactly does it mean and why is it so important?

A competitive set is a group of hotels that typically comprises between 5 and 10 properties, which a hotelier regularly monitors for strategic information. These competitors are chosen because they can provide valuable data on rates applied, room types offered and peak and low season periods, helping the hotel monitor the market and analyse its pricing and segmentation strategies.

Who are the competitors of an accommodation facility?

There are different types of competitors that a hotel can consider in its competitive set.

  • Destination competitors: accommodation facilities located in the same location as your own, even if they are not directly comparable in terms of category or services offered. For example, a luxury hotel and a bed and breakfast in the same city might be considered a destination competitor because they attract customers to the same geographic area, even though they have different wants and needs.
  • Product competitors: these are properties that offer a product similar to your own, but in different locations. An example would be a hotel near Malpensa airport that is compared to another property in another airport area, e.g. Fiumicino, to assess the services offered to travellers.
  • Segment competitors: these are properties that only share certain specific customer segments with yours, regardless of the destination or type of product. For example, a 5-star hotel with meeting rooms might consider a 3-star hotel with a conference centre as a competitor, because although the type of hotel is different, they both share the same target.
How do you decide which competitors to monitor?

This choice is undoubtedly one of the most difficult for hoteliers and revenue managers and is particularly influenced by the type of destination and the local competitive environment. In cities with many hotels, it is crucial to consider the product offered, the size and the services for guests. For example, in a metropolis with a high hotel density, a boutique hotel with 20 rooms might analyse other similar boutique hotels, rather than large hotel chains.

In areas with fewer accommodation facilities, location becomes a determining factor. In these contexts, a hotel may choose competitors based primarily on geographical proximity, as the choice of accommodation for customers is more limited.

Another factor to consider when defining a competitor set is the brand reputation of the hotels. Online reputation can greatly influence customers' perception of value and, as a result, their pricing strategy. A hotel with very poor reviews should therefore avoid comparing itself to hotels with excellent ratings, as the price differences may be too significant.

Why is it critical to establish your competitive set?

By comparing rates with competitors, a hotel can ensure it remains competitive by avoiding overcharging or undercharging for its rooms. In addition, having a clear picture of the market can help to identify new trends, thus enabling properties to refresh their offer to better meet customer needs.

Making in-depth assessments of competitors’ online reputations can also be a valuable tool in identifying areas for improvement in their service, thereby raising the overall quality of the offer.

What data should you analyse?

Once you have established your property's competitor set, it's important to look at their promotional strategies, such as special packages, seasonal discounts and last-minute deals. Particular attention should also be paid to analysing historical data, such as occupancy rates and price fluctuations, in order to predict future trends and adapt your strategies accordingly.

Finally, it is particularly important to emphasise that a hotel's competitive set is not a static set, which is why it has to be constantly monitored and updated.

Are there tools to support hoteliers in defining and analysing competitors?

Blastness offers two software solutions that can become valuable allies of hoteliers in defining their competitor set and analysing competitors’ performance.

The first tool is Market Intelligence which, thanks to AI-powered algorithms, is able to define a property’s competitor set based on objective factors and constantly update it according to data-driven logic.

The second tool is the Rate Shopper + Parity Check, which allows you to monitor the price differences daily between your hotel and a set of properties chosen by the hotelier.

Want to find out more about the advanced tool for the creation of the Competitive Set?