There’s nothing wrong with watching your comp set. In fact, competitive pricing intelligence is an important part of hotel revenue management. Knowing where your rates sit in the market helps provide context, identify opportunities, and avoid becoming disconnected from local conditions.
NB: This is an article from TCRM, one of our Expert Partners
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The problem starts when comp set pricing stops being a reference point and becomes the strategy itself.
Too often, hotels fall into a cycle where pricing decisions are driven almost entirely by what competitors are doing at that moment. One hotel adjusts rates, another reacts, a third follows, and before long the market begins moving without anyone stopping to ask a simple question:
Why?
This is where competitive pricing can quietly turn into competitive guessing.
The assumption behind reactive pricing is that competitors know something you don’t. If another hotel raises rates, many assume demand is strengthening or compression is building. If another hotel lowers rates, the assumption shifts toward softening demand or slower pickup.
But what if neither assumption is correct?
What if the hotel raising rates is simply reacting to another competitor? What if they are testing price tolerance without strong booking data behind it? What if ownership pushed for more aggressive ADR goals? On the other hand, what if a hotel lowers rates in response to the pace, to manage cash flow concerns, or simply to chase occupancy without a clear strategy?
Or perhaps they are watching your rates just as closely and reacting to you.
At some point, the entire process starts to resemble circular logic. Everyone is watching everyone else, adjusting rates in response to each other’s movements, while fewer decisions are grounded in actual demand forecasting. Markets can begin drifting upward or downward without a clear connection to true demand conditions.
The danger in this approach is that it assumes competitor pricing is inherently intelligent.
Sometimes it is. Sometimes it absolutely is not.
A hotel could be under renovation or have just landed airline crew business, shrinking its inventory. They may have pickup concerns tied to a group block and decide they need to price aggressively to pick up rooms quickly. They may be pushing rate because ownership wants stronger ADR performance. Another hotel may be discounting because they are behind budget and trying to stimulate occupancy quickly. An automated system may be overreacting to limited data inputs. An inexperienced manager may simply be following what others are doing. Any number of things could be happening at any time.
