Your CompSet is a decisive factor for your revenue management strategy. But not in every hotel the competitors have the same importance. This article explains why many hotels misinterpret the definition of a CompSet and how you can meaningfully define and analyse the CompSet for your hotel.
- Explanation – What is a CompSet | Competition Set | Competitor Set | Competitive Set ?
- Determine your CompSet individually!
- Know your strengths!
- Analyse your performance!
- CompSet & Prices
Explanation – What is a CompSet | Competition Set | Competitor Set | Competitive Set?
In a CompSet (Competitor Set) you define the five to ten strongest competitors for your hotel. The most important thing is that the competitors address the same target group as you do!
Which other hotels do your guests look at? Which hotels fall into the shortlist?
Often the first and biggest mistake is made here. The hotels that the hotelier would like to have as competitors are included in the CompSet!
By the way: CompSet is often replaced by Competition Set, Competitor Set or Competitive Set.
Determine your CompSet individually!
The decisive factor for your Competitor Set is, as is often the case, your guests! So take a close look at your target groups. Surely you know why guests choose your hotel and what they value most.
Once you have found this out, look at the booking process through the eyes of your guests. At best, ask some of your guests why they chose your hotel, which hotels they might still like to go to and why. Then select competitors for your CompSet based on these decision criteria.
You will soon realise that not all guests always choose where to go first!
It is not uncommon to hear hoteliers say, “We don’t have enough competitors in the area that are on par with us.”
Many hotels make the mistake of only selecting hotels in their own area into their CompSet. This is not always wise. Because, especially with holidaymakers, it can sometimes be the other way round. There are several places to choose from or the hotel determines the holiday destination.
So make your CompSet dependent on your target groups and include hotels in your CompSet that address the same guests as you do!
Know your strengths!
Once you have identified your competitors, find out what exactly differentiates your hotel from your competitors and where the strengths and weaknesses lie. What are the decisive criteria that motivate your guests to book in your hotel?
First compare the following criteria with your competitors:
Quality of service
These criteria will play a role in every decision. You can create a tabular overview for this purpose:
Determine the ADR for each hotel, assign a score for the location or adopt the score of an OTA. Guest satisfaction is a good indicator for quality, which can be determined via rating portals, for example. It also never hurts to look at other hotels yourself from the guest perspective!
It is important that you recognise where your strengths and weaknesses lie. Because if you know this, you can fully concentrate on them and consciously focus on them.
In addition, you should identify your Unique Selling Points (USP’s) compared to your competitors. The USP’s set you apart from your competitors and represent an important, if not the most important decision criterion in the booking process of your guests. You should also be aware of the USP’s of your competitors!
Analyse your competitors carefully and search their websites. This will give you a feeling for the different focuses and specialities.
With the information you have gathered, you can now decide how you want to position your hotel in the market in the future. Don’t be afraid to revise past decisions and rethink your market position. Keep an eye on your competitors to see when changes are necessary. It is important to remain flexible and adapt to current developments. It is even better to be the pioneer with new ideas and innovations. Convince your guests with creative innovations that outshine your competitors.
Analyse your performance!
In order to analyse your performance in comparison with your competitors, there are various key figures.
MPI (Market Penetration Index)
The MPI sets the own hotel occupancy in relation to the occupancy of the CompSet. It indicates which share of the market the own hotel serves.
ARI (Average Rate Index)
The ARI compares your own average price with the average price of your competitors.
RGI (Revenue Generated Index)
The Revenue Generating Index (RGI) determines the revenue per available room in relation to the RevPAR of the competitors in the CompSet (selected competitors).
Attention! The key figures should never be considered in isolation from each other.
If the MPI is very high and the ARI is low, this could be an indicator of prices that are too low. If the ARI is very high and the MPI low, prices may be too high.
CompSet & Prices
In big cities, the prices of the competitors often play an overriding role. There is a high level of competition so that prices have to be permanently observed.
Many medium-sized hotels in rural areas or smaller cities rightly notice that this does not apply to them. However, the conclusion is often drawn that revenue management therefore does not work and that a revenue management system is out of the question. If you are one of these hoteliers, read on, because this is a fallacy. It leads to many hotels leaving money lying around. Because revenue management starts with the hotel’s own demand. And this does not have much to do with the prices of the competitors. happyhotel is a revenue management software that observes the demand behaviour within your defined competitive set! If your demand for certain dates increases, happyhotel recognises this and raises your prices. This has nothing to do with your competitors! However, if you do not adjust your prices to the booking behaviour of your guests, you will not realise the chance of higher turnover.
Creating a CompSet is therefore by no means superfluous! On the contrary – it serves your own classification and positioning in the market, gives you an overview of your competitors and helps you to come up with new ideas.
Nevertheless, the demand of your CompSet can be determined and incorporated into your pricing strategy. A rate shopper, a system that supports your pricing with a view to your competitors, is suitable for this. Your competitors are a puzzle piece for your pricing. They should never be considered alone, but always together with your forecasts, your current occupancy and your PickUp.