Identifying true competitors is a crucial factor for the success of a hotel. In an increasingly saturated market, it is no longer sufficient to only consider nearby hotels or those in the same chain as competition. But how can a hotelier ensure that they are focusing on the right competitors? In this blog post, we’ll explore how to identify true competitors and how many are reasonable to consider when making pricing decisions.
1. Who Are My True Competitors?
A common mistake is to focus solely on neighboring hotels as competition. Instead, various aspects should be taken into account:
- Similar Target Audience: Which hotels attract a comparable clientele? This can include leisure or business travelers, families, or luxury versus budget travelers. Even if a hotel is geographically farther away, it can still be a relevant competitor if it appeals to the same customers.
- Price Level and Offering: Hotels operating in the same price segment and offering similar services (like spas, conference rooms, or restaurants) often represent direct competition, even if they have different star ratings.
- Online Reviews and Reputation: Hotels with similar ratings on platforms like TripAdvisor or Booking.com often provide a comparable customer experience and are therefore often grouped into the same competitive category.
- Location and Accessibility: Naturally, location plays a significant role. A hotel in the city center will have different competitors than one in a rural area. However, proximity to transportation hubs like airports or train stations should also be considered.
2. How Do I Define My True Competitors?
To identify the right competitors, hoteliers should employ a combination of qualitative and quantitative methods:
- Market Segmentation: First, the hotel should be clearly positioned. What type of guests are being targeted? What does the pricing structure look like? What special amenities or services are offered? This lays the foundation for defining competitors.
- Benchmarking: Regular benchmarking is beneficial. Tools and platforms like STR Global or OTA Insight provide valuable insights into the competition and show which hotels have similar occupancy rates, prices, and reviews.
- Analyzing Guest Reviews: Reviews and comments from guests often provide insights into which hotels are perceived as alternatives. Guests frequently mention where they might have booked instead or why they chose your hotel.
3. How Many Competitors Should I Consider for Pricing Decisions?
The number of competitors to consider for pricing decisions depends on several factors, including market size, location, and the type of hotel. A common practice is to analyze between 5 and 10 competitors to obtain a balanced view of the market.
- Too Few Competitors: Analyzing only 2-3 hotels can lead to a distorted perspective. The market is constantly changing, and it is essential to consider a sufficient number of competitors to make informed decisions.
- Too Many Competitors: Conversely, analyzing too many competitors can dilute the picture, making it more challenging to develop clear pricing strategies. The effort required for monitoring also increases exponentially.
A balanced number of competitors provides an overview of market trends without overwhelming the decision-making process.
Conclusion: Strategic Competition Selection for Sustainable Success
Identifying the right competitors and determining the ideal number to consider for pricing decisions is an ongoing task. It requires regular market observation and a deep understanding of one’s target audience and positioning.
The true competition is not necessarily just the hotels in immediate proximity, but those that serve a similar target audience and offer comparable services. For informed pricing decisions, 5 to 10 competitors are typically ideal to monitor market dynamics and respond accordingly.
