It's Time to Revisit Your Comp Set

It seems fundamental enough; do we understand who our competition is, and do we understand why?  Despite the apparent simplicity of these questions, it should surprise no one to know that there are numerous interpretations of competition, and this manifests itself in many ways in how we do business.

Strategically, a consistent and objective definition of our competition is crucial.  If we are the least bit uncertain or unclear in establishing our competitive set(s), the strategies and tactics that we develop in order to compete will also be uncertain or unclear.  Fundamentally, one cannot establish a strategic plan without first being crystal clear in one’s knowledge of who our competition is, and who our competition is not.

Most of us work with defined competitive sets which have been established to serve our purpose as the operators/leaders of our hotels.  While this much is probably easy to agree upon, the actual use of these competitive sets can vary based upon circumstance, strategy, and overall management philosophy.  It is important to note that such flexibility is welcome and necessary, but only to a point.  First and foremost, a competitive set and any data that we use from that competitive set (think STR) must be an accurate reflection of those properties that truly are our competition.  Who decides this?  Clearly, we decide on our own competitive sets, but if we do so without the input and viewpoint of the customer in mind, we are likely missing an opportunity to be absolutely precise in our competitive set definition.

Here’s the point: a competitive set must represent those properties that truly represent competition for us; in product, in location, in service, and in branding.  In addition, such a set must represent a choice or consideration for the customer; when they are thinking about where to stay in our market, what hotels do they seriously consider in addition to our own?

As for the use of performance data from such competitive sets, this can certainly be open to interpretation, but one purpose must be clear.  The primary purpose of measuring our own performance against a competitive set is to better understand the detail of our performance against that set; Transient, Group, Contract, Weekday, Weekend, etc.  In so many cases, our own ability to slice and dice this data can play a huge role in our own revenue management and pricing strategies.  Hence, the accuracy of the competitive set(s) is paramount.

So, when a property selects a competitive set that is not truly reflective of the competitive environment in which it resides, that property must accept the fact that the data received from this set (and therefore any conclusions drawn from this data) may be flawed.  As an example, if a property were to include in its set certain properties that were clearly lower-tier competitors, whether in location, product, brand, or otherwise, that same property would need to accept the fact that its own performance vs. such a set will be artificially inflated to make itself look better.  If this is the desired outcome for the property, this is of course its choice.  However, awareness and acceptance of the fact that data that is reflective of an inaccurate set is therefore also inaccurate is required.

What’s the point?  Market intelligence, particularly as it relates to the performance of our competition, starts with our ability to clearly define who our competition truly is.  Realistically, not all competitive sets are easily derived; it’s not unusual that some member hotels are easily decided upon while others are less obvious.   If, in fact, our set is known to be ‘less than perfect,’ it is important to factor this knowledge into any(and every) analysis that we may do using that competitive set data.  By the same token, it is vital that we periodically review our comp sets, to ensure that they are as accurate as possible.  A review of existing comp set(s) should take place at least annually at the time of one’s budget and marketing plan development, if for no reason other than to reinforce its accuracy.  In the end, it is our responsibility to be completely objective in the establishment of our competitive sets, so that the information that comes from this data, and any resulting strategic planning, can be utilized to provide maximum benefit to the performance of our assets.