Recovery seems to be the hottest keyword in the industry today.
NB: This is an article from Knowland
However, even with recovery either well under way in some markets or beginning to take hold in others, there is still disruption occurring. And this disruption is impacting all aspects of the industry.
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While there are a multitude of things disrupting recovery, one stands out: the change in customer buying behavior. This change has affected every aspect of the booking process: booking window, destination, type of hotel used, etc. This disruption will wreak havoc with hotels that strictly adhere to monitoring the same old competitive set(s) they used before the pandemic. To thrive (not just eke out survival), hotels must change their approach to competitive sets.
Who Do You Really Compete Against?
Competitive sets have defined how hotels measure performance since the mid-’80s. Hotels are incented against them and build action plans around them. But, too often, they are a prison limiting the ability to grow business. Here’s why:
- COVID created bedlam in how our customers do business. This has resulted in a change in the hotels they are consuming. While this has been seen most consistently in transient business, it is evolving with group as well. Customers are looking up and down the spectrum of hotels. This means some customers will buy down (lower scale or price point) to save money and some will buy up (higher scale or price point) to get an enhanced experience. This means if a hotel is only looking at comp set hotels it will miss business moving up or down as it returns.
- The five to eight hotels in your competitive set do not make up your market. They likely don’t even represent all your competitors. At best they show all your competition in a single market segment. However, they fail to truly cover all of what happens in a market today. Viewing your ability to acquire business based solely on a comp set limits your ability to drive revenue.
- Comp sets, in the best of times, create an inherent myopia. During times of distress and even recovery, myopia can cripple your ability to move forward. Living and dying by a handful of hotels means you might miss when key accounts begin to travel again because they have changed their buying behavior due to the disruption.
- Meetings are smaller now, so organizations might be looking at a whole new set of hotels with less meeting space than you have. Being flexible with the hotels you monitor based upon their meeting space is crucial. That 4,000-square-foot hotel you’ve overlooked for years might just be the market leader now. If you’ve neglected them in the past and continue to, you do so at your own peril.
- Your customers don’t know who is in your comp set, nor do they care. Both transient and group customers make buy decisions for their own reasons, which have little to do with your chosen comp set. If you aren’t looking around, you’re going to miss when they are.
Compete Beyond the Comp Set
If you can’t trust your comp set, what should you be doing? Change is the answer. Change the way you look at every aspect of your business because it has changed. Broadening your world view will help your teams have a deeper understanding of what demand really exists and how you can capitalize on it. In other words, it will help you respond versus reacting.
- Re-evaluate who you consider as competition. Look up, down and all around. This doesn’t just encompass chain scale. You should look at different size hotels as well.
- Use your business-intelligence tools to tell you what market segments are booking. Then look at competitors through the lens of market segment. Chances are you are going to need to look at a different set of hotels for each segment for some time to come.
- Communicate the new broadened view of the competitive landscape. Make sure everyone who impacts revenue understands how and why you have included those hotels and specifically which segment(s) for which they are a treat.
- Adjust your sales strategies for the new hotels you now compete against. When is the last time (if ever) you stepped into some of those hotels? Your sales team needs to be able to sell effectively against newly identified competition.
- Create ways to monitor those hotels. Whether that is through multiple competitive sets in your business-intelligence tools or monitoring locally, it is important to see how those hotels are performing and how your change in strategy might be impacting their performance.
- Keep an eye on the market as a whole. This is equally important for on-the-books business and consumed business. Understanding what types of businesses have been in your market will give you an understanding of the verticals that are booking (this is especially important for corporate travel). If a company in a vertical is traveling or meeting, chances are other companies in the same vertical are also meeting. Understanding who and what group is traveling and/or meeting will help inform your sales strategies.
- Be prepared to be nimble. Recovery is going to come from everywhere and understanding what’s driving recovery in the market is the only way you will be able to capitalize on what’s happening around you.
- Sales and revenue management need to be in lockstep more than ever. Revenue management typically has a firm grasp of the numbers while sales can do the focused targeting. They should be talking daily about what has changed and what impact sales strategies are having on the forward-looking data.
Stepping outside the comfort zone of your comp set will allow you to understand not only where your customers might be booking but also what your market’s customers are booking. Once you have a clear understanding of the overall demand (not just what exists in your small comp set), you can develop accurate sales strategies to target that business. More importantly, your revenue team can partner to help you price more effectively.
For most markets, recovery is here and it’s picking up steam. Even if recovery hasn’t quite reached your market, broadening your approach to competitive sets will help you when it happens. Now is the time to make those adjustments so your team is ahead of the curve.