Benchmarking in a pandemic – How to understand your competition today

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Sep 8, 2021

Benchmarking in a pandemic – How to understand your competition today

The pandemic has fundamentally reshaped source markets for hotels and significantly changed the competitive landscape. Today, identifying who your guests are, who the competition is and how your property is performing relative to other hotels in the market is a real challenge.

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Joyce de Kruif, Principal Industry Consultant, APAC.

So, where is business coming from?

To understand where your property sits in its competitive environment, hoteliers need to understand who their guest is: where are they coming from, how long are they staying for, and what is attracting them to your property? After all, business and leisure travel look completely different to before. People are now travelling less and over shorter distances. Booking windows are shorter as guests take advantage of last-minute deals and show a reluctance to plan too far ahead in case travel restrictions change. Therefore, it is important to understand if your property seen an uptick in domestic travelers arriving via car versus airplane? Are you receiving more staycation guests from the same city in which your property is based looking for a luxury escape from the house?

To identify where business is coming from and what guests want, hotels must ask:

Who are your customers? – It’s important to have a clear understanding of who your potential guests are, review how to segment them and then re-evaluate who else is targeting them.
What do they want? – Behaviors are changing, so what your customers are looking for may have changed—and with that their choices. Ask yourself where they would go if you didn’t have availability?
What do they value? – Price sensitivity and perception of value has also changed, so revisit how your services and products are valued by the customer.

When your competitor resembles you, chances are it will pursue a similar market. When a property has a different product offering, market positioning and strategy, they will probably react to the same market opportunities and threats in different ways. One of the keys to predicting a competitor’s future strategies is to understand how much or little it resembles your own hotel.

Who really is the competition?

By tradition, hospitality organisations determine their competitors in proximity of their property. However, with the shift in demand towards domestic, drive-up market it is important for organisations to understand how they are competing with other destinations and in a wider perspective industries. The property next to you is not necessarily your direct competitor; sometimes a property which is located on the other side of the city might be a heavier competitor; in case of resorts, you might want to compare yourself with similar properties around the world.

A true competitor is a property that competes with you in most of the segments which are generating demand for your property. This might have changed drastically with the pandemic and will change again once travel reopens, and recovery begins. A true competitor is also property which makes a pricing action that would force you to respond; or the opposite.

How are your competitors pricing themselves? How should you react?

Understanding who the competition are is important in helping to determine price positioning and how to react to other property’s pricing movements. Hoteliers should monitor all relevant competitors’ pricing activities, such as increasing their corporate rate during the week or leisure rate on the weekends, that would compel your own property to react.

Utilising rate shopping data is a powerful tool to not only optimise your pricing but to create a better understanding of the impact competitor pricing has on your unconstrained demand and therefore your forecast which in return influences your pricing decisions. When analysing rate shopping data operators are very well versed with the correlation between competitor pricing and your own pricing but -- are you analysing the correlation of changes in price? How erratic and reactive is your competition with their pricing? Are they following an ascending pricing model, or do they tend to drop price closer to the arrival date? How are their price changes for standard rooms and suites? Many times analysis of competitor prices and changes are performed in isolation from your booking patterns and forecast. Is your booking window the same as your competitors? OTA analysis dashboards provide you with great free data insights in how your booking window compares to your competitive set.

Hotel operators may be inclined to compare pricing with their competitors just for the lead in category and for their best available and lowest rate. But it goes beyond that - it is important to evaluate which competitors you are competing with by segment, channel and in your room classes.

How do you benchmark against the competition?

Benchmarking helps hoteliers to understand and discover new opportunities, along with identifying performance gaps. Owners often request benchmarking to help ascertain asset valuations, as part of investment programs or to measure a properties market share and performance against its competitors. Identifying the purpose of any benchmarking exercise can help ascertain who hotel needs to benchmark against and what characteristics should be compared.

Ahead of any in-depth benchmarking work being undertaken, parameters need to be set for competitive comparison. In this phase it is critical that a hotel identifies the purpose of benchmarking, which can help ascertain who hotel needs to benchmark against and what characteristics should be compared. For instance, benchmarking for demand and pricing purposes requires unique data and evaluations. This may need a different competitor set compared to undertaking benchmarking for financial reporting.

Conducting a strengths, weaknesses, opportunity and threat (SWOT) analysis is a powerful way to evaluate your organisation. SWOT analyses are used to determine how closely your business is aligned with its growth trajectories, success benchmarks and in line with the corporate identity.

Today, hotels also need to consider how their property and market have changed since the pandemic. To understand this, hotels first need to look at their competition and map current competitor sets across all channels, from STR to a revenue management system (RMS), demand, reputation and rate-shopping tools before scanning the market for potential competitors by using traditional and emerging factors in any research.

While it is time-consuming, it is important to inspect the selected properties physically and online. All hotels are continuously improving their service offerings and facilities and it is vital to have intelligence on this. What is a competitor’s value proposition today? What are their strengths and weaknesses? Completing a thorough analysis helps provide with answers to these questions and provides a hotel with the information to make data-driven decisions sensitive to its competitive environment.

Monitor the competitive environment, plan for the long term

Competitor monitoring and benchmarking is not a one-time exercise but an ongoing process as an integral component of a hotel’s business strategy. The insights gained from the process help hotels to understand how to best attract guests in a changing market and provides organisations with a foundation to strategic thinking and leads to greater awareness of the need for long term planning. Market intelligence and benchmarking activities help hotels search for and apply newer, better practices that lead to improvements and superior competitive performance.