Yield Management

When Did Your Comp Set Die? - By Jean Francois Mourier

Surprisingly, some hotels even make the claim: 'I have no direct competition.'

RevPar Guru
I'm sure that you are all familiar with the term comp set, which is short for competitive set. A comp set is defined as the "other, competing hotels against which a property measures its own performance." In most cases, properties within a comp set are in the same geographical location, have the same star rating, provide similar amenities and customer experience. Comp sets can be comprised of many hotels or in some cases, as few as two. Surprisingly, some hotels even make the claim: "I have no direct competition." My answer to that is always: "Wow, that's exciting. Your hotel is the only one in your destination? Oh, there's more than one? Well, then yes, you do have competition."

The comp set was created in a completely different time, before the Internet reshaped our world. At that time, the STR report was a standard business expense for hoteliers as it was a very effective way to measure past successes (or failures) and gave hotels fantastic insight into the competition's rates, performance, etc.

STR required that each property choose the five properties which were most comparable, in order to generate a comparison. Obviously, this selection process made the reports (and a hotels chosen comp set) completely subjective. For example, a three-star property could chose to add only five-star properties to their STR comp set even though five-star properties are not direct competition for a three-star property. While STR would have no problem with that decision, it doesnt make good business sense, especially in todays online marketplace. But for some unknown reason, hoteliers and revenue managers continue to maintain the mistaken impression that there are only five hotels in each property's comp set. This is not true!

Today, revenue managers need to use a new parameter to determine a propertys competition in the online channel: the online comp set. Using OTAs, consumers have visibility to all of the hotels within a destination. Consumers don't know - and definitely don't care - which hotels are in your comp set and which aren't; all they want is the best hotel, in the best location, for the best price - which is where the online comp set comes in.

The online comp set is comprised of all of the hotels within your destination - both locally and regionally (and not just 5!). A property's online comp set includes all properties within the destination with the same OTA star ranking.

A property's online comp set is determined indirectly by the OTAs, because consumers base their booking decisions on the properties that they see listed online within a destination. Unlike the fixed traditional comp set, the online comp set fluctuates constantly based on time, the booking pace of all the hotels in the region, the general demand within the destination, etc. so revenue managers must continuously monitor the rates of the properties within their online comp set to ensure that they are able to compete. Whether it is done manually or through the use of a sophisticated revenue management system, this is an operational imperative for revenue managers using the online channel to sell rooms.

So revenue managers, today's lesson isn't to completely get rid of the traditional comp set model; instead, recognize where and when it is effective. When planning your pricing strategy, use the online comp set and factor in all of the hotels within your destination not just the five that you think are most comparable. After all, it may be the properties that you least expect who are stealing the most potential business.

Jean Francois Mourier is CEO and Founder of REVPAR GURU, an intelligent online solution that provides hotels around the world with an alternative revenue management software system designed to deliver maximum bookings and profits, as well as the convenience of full automation and integration 24/7. As REVPAR GURU's custom-designed Yield Dynamic Price Engine is the only real-time revenue management system available on the market, it meets the rapidly changing needs of hotels looking to increase their competitive advantage in an increasingly difficult marketplace. REVPAR GURU’s system offers dynamic rate optimization, real-time pricing, integrated internet and extranet yield channel management and GDS sales distribution, to increase a hotel's RevPAR intelligently and effectively, while maintaining rate integrity and automated rate parity. Since 2004, smart hoteliers worldwide have used REVPAR GURU’s software system to increase occupancy, average daily rate (ADR) and RevPAR.

To learn more about REVPAR GURU, please visit www.revparguru.com or call +1.786.478.3500. Follow REVPAR GURU on Twitter, Facebook, LinkedIn or YouTube.

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