Market Share
Revenue Management

Who Moved My Hotel’s Market Share?

By , Senior Industry Consultant

A look at effective benchmarking in 2021—not as a one-time exercise but as an ongoing, integral component of your competitive strategy.

Traditional revenue management has used historical data to navigate rates and inventory. Due to the pandemic, however, historical data lost some relevance as last year and this year will go in the books as statistical anomalies.

Past metrics to measure against competitors are still valid, but other information such as on-the-books reservations, pick-up, pace, and of course your comp set have become more important. Through benchmarking we can measure, analyze, and answer: “Who moved my market share?”

Benchmarking supports with understanding and discovering new opportunities and identifying performance gaps while continuously searching for and applying significantly better practices that lead to improvements and superior competitive performance.

Reevaluating Your Competition

The challenges organizations face is how to clearly identify one’s mid- and post-COVID comp set. With widespread travel restrictions still in place, it is likely the recovery will go from a micro level, domestic and drive-up market, to an international macro level. As a result, the competitive landscape will change over time and requires reevaluation.

Understanding your competitors today will be vital in shaping your strategy and measuring your performance and success. Your competitive landscape may have changed drastically over the past year. You may now face multiple competitors, including some that were not considered direct competitors before.

To determine your current comp set, we must first get back to the basics in understanding your customer base:

  • 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 organization.

While understanding and ideally getting ahead of competitors is fundamental, it’s important to remember that in current circumstances, your biggest competitor may be yourself. It’s important to work together as a unified commercial team in a constantly changing landscape. Organizations should start competing with themselves to define strategies and commercial success.

Emerging KPIs

The pandemic has resulted in a radical market disruption that makes goal-setting tricky and often unreliable. Therefore, it is important to highlight the need to set KPIs relative to competitor’s performance during disruption and even to a greater extent in the recovery phase.

While traditional metrics are still important performance measurements, the industry has begun gravitating toward other standards that represent their wider spectrum of operations. There is still limited competitive data available in terms of profitability KPIs. It is important organizations start to measure these internally to better understand their revenue versus profitability ratio to make strategic decisions in relation to pricing and special offers—where to spend marketing dollars and which distribution channels to collaborate with.

Let’s look at some of the emerging KPIs in more detail:

  • Demand & Price – Beyond the application of advanced data modeling techniques, the industry faces an accelerating change which calls for needing high-frequency data and utilizing unconventional indicators for clarity. Information such as on-the-books reservations, pick-up, pace, competitive pricing by segment, room class, distribution and marketing channels have become more relevant than ever.
  • Paid/Net Revenue Capture – Paid revenue and revenue capture supports your strategy of truly comparing apples to apples when analyzing your revenue and ADR potential by adding the mark-up and commissions from wholesalers and online travel agencies to the revenues and ADR. These measurements help the property understand what consumers are willing to pay and gives a performance-based analysis of what and how much revenue is truly kept after customer acquisition costs are paid.
  • TRevPAR – Total Revenue Per Available Room supports your strategy to look at revenues holistically including ancillary revenues, which all make significant contributions to overall profitability. When ancillary revenue streams such as F&B, banqueting and spa services are not properly measured and evaluated, a property’s big picture in terms of profitability misses critical pieces that metrics like Gross Operating Profit Per Occupied Room (GOPPAR) can fulfill.
  • COPE – Measuring the percentage of net revenue produced by each channel allows for an analysis of profitability at the channel, segment, rate code or individual booking level. Sales & marketing efficiency provides you with insights on the efficiency of how much revenue is generated for every dollar spent.
  • M&E – And lastly, while meetings & events (M&E) are not on everyone’s radar now, the segment will return and, in some markets, where recovery has been strong, we have seen an increase in M&E requests. Establishing KPIs that measure areas beyond rooms to M&E space is typically the best place for organizations to start. Emerging KPIs in function space revenue management (e.g., space utilization, conversion, and attendee density) are fast becoming the industry standard metric in evaluating M&E performance.

The 3 Phases of Effective Benchmarking

There are three phases in benchmarking, of which the pre-benchmarking is probably the most important part, focusing on the “why” and “who”—and this starts with your own organization getting clarity on the “why”:

  • Why are you performing a benchmarking exercise? Benchmarking for demand and pricing purposes need different evaluations and therefore may need a different comp set than when you benchmark for financial reporting.
  • Why do customers choose your accommodation? What makes you stand out from the competition?

Conducting a strengths, weaknesses, opportunity and threat (SWOT) analysis is a powerful way to evaluate your organization. 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

The last two questions to answer about your organization is how has your property and market changed since the pandemic and how do you anticipate your property and market to change once the market is entering the recovery phase or is entering a matured state of a new norm?

Let’s look at your competition. It is important to first map current comp sets you use today across all channels, from STR to your RMS, demand, reputation and rate-shopping tools before scanning the market for potential competitors by using traditional and emerging factors in your research.

While it is time-consuming, it is important to inspect the selected properties physically and online. Just like you continuously improve your service offerings and facilities, so do your competitors. What is their value proposition? What are their strengths and weaknesses? Collect all data to perform a price/value assessment to select your competitors.

Completing these steps will provide you with the information to make data-driven decisions in selecting your comp sets by factor. You may have more than one set, your comp set by market segment may be different to your comp set for your room classes or location. It is important to answer: why do I need this comp set and what will I be benchmarking the set against?

In the benchmarking phase we will determine the scope by identifying the KPIs that answer the “why.” Building a framework to measure the KPIs is the next step followed by sourcing the data to be able to calculate the KPIs. The analysis and measure stage is straightforward if you have done the groundwork in the pre-benchmarking phase and determine the scope of the benchmarking. And with all measurements it is test, evaluate, revise and test again.

The last phase in benchmarking is about evaluating your process, measurements and comp sets. Develop a framework of the “what”: what KPIs are you measuring and creating a discipline of the how. Once that process is established you can develop a strategy and action plan, which needs to be reviewed on a regular basis.

And lastly it is all about reevaluating and repetition. The pandemic has triggered industry disruptions that underline the need to increasingly utilize competitor-based KPI benchmarking. Use benchmarking to effectively accelerate profitable change and help with a steady recovery by developing a holistic plan, adopt total organizational metrics and make data-driven decisions.

Senior Industry Consultant

Joyce de Kruif enjoys taking revenue leaders on a journey to become revenue strategists. She has a wealth of international experience in hotels and resorts in luxury and budget segments. She enjoys data analysis, developing pricing architecture strategies, and forecast optimization. At IDeaS, Joyce works on projects that help hospitality and parking businesses build strategic revenue management cultures.

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