Add a Pinch of Research, and a Dash of Common-Sense
|By: Neil Salerno July 2006
A chef, I am not, but I do know how to gobble-up the competition. One of the best ways to measure the sales success of your hotel is to compare your hotel’s results with that of your competition. In many ways, this is more realistic than simply comparing results with your sales budget or last year’s numbers.
Many savvy companies now use competition-set comparisons to judge the true effectiveness of their marketing programs. Hopefully one day, comp-set comparisons will find their way into monthly operating statements.
Many hotels attempt to operate in a vacuum, ignorant and impervious to everything happening around them. They set rates, determine amenities, create promotions, develop their web sites, and establish operating standards, all without knowing or caring what the competition is doing. This doesn’t make sense even if your property is performing well, slow suicide if it isn’t.
How Well Do You Know Your Competition?
In the real world, consumers have a wide range of hotels to choose from. Experienced managers know that just having a great hotel is no guarantee of success. There are managers who sit back and wait for success to come; and those who go out and grab it. Smaller properties can play with the big boys.
Smaller hotels need to borrow some techniques from chain institutions by first performing a simple competition analysis. There are many tools to do this, but my favorite is called a S.W.O.T report which compares your hotel’s Strengths, Weaknesses, Opportunities, and Threats.
This report goes beyond the normal quantity and quality of rooms/rates and other physical attributes; it also includes a comparison of management styles, sales talent, operating limitations, web site popularity and productivity, and front desk staff.
An honest appraisal of your hotel as compared to your competition will reveal and suggest many ways to improve your position in the marketplace. From the S.W.O.T. report, you will be able to define your comparative strengths and develop your recipe to exploit them.
No evaluation can be complete without comparing financial results. I know of no better source of competition-set financial data than STR reports from Smith Travel Research. If you are fortunate enough to be in one of their participation areas, the STR report can give you an occupancy, average rate, and RevPar comparison with other hotels that compete with yours. Check STR out online; it could be the best marketing small investment you’ve ever made. No, I don’t receive compensation from STR; they are simply the best.
Revenue per Available Room (RevPar)
We all know that comparisons of occupancy and average rate can be very confusing and deceptive; after-all, would you prefer to have 68% occupancy at a $125 ADR or 64% occupancy at a $138 ADR? Unless your competition has exactly the same number of rooms and rates, comparing occupancy is futile. ADR alone can be very deceptive. This changed when some great minds gave us RevPar or revenue per available room, a perfect tool to compare revenue performance.
RevPar gives us the ability to compare hotels of different sizes and varying average rates. Since revenue generated is the primary goal of every hotel, RevPar allows us to combine average rate with occupancy by measuring the amount of revenue generated per available room in the hotel.
RevPar is also simple to compute; simply multiply your average rate times the occupancy percentage for that period; the result is the amount of revenue generated for each room available for sale.
Take Names and Kick Butts
It’s important to assign a face and name to your competition; get specific. Too often, I hear managers refer to “the competition”, but have to sit down and think about which hotels they actually are and why.
Generally, there are only one or two hotels that present the most serious threat to your ultimate success. Your hotel is probably on their lists as well. It always amazes me how many hoteliers have so little information about specific competitive hotels. Get to know them well; as well as you know your own.
Unless your hotel completely dominates your competitive environment, one or two hotels in your competition set are preventing your hotel from fulfilling its full potential. From your new S.W.O.T. report and your new STR report, you can determine who they are and develop ways to take advantage of their weaknesses and your strengths.
For those, who think this may be a little cold, you were probably not around during the intense “sales warfare” of the early 90’s. An intense competitive environment has always stimulated sales innovation. It benefits our industry.
Focus Your Team on Challenges not just Procedures
As a rule, people can be very creative in dealing with the challenges to your top-line. In far too many cases, owners and managers present procedures and solutions instead of the challenges. Try empowering your team to solve the challenges presented in your market and let them create the procedures and solutions. Put aside all your prejudices and “knowledge” of the market and let them create new ways to capture business. You might be amazed by their innovation.
I will never forget what happened at a hotel in Roanoke, Virginia many years ago. Every summer for years, group business fell flat. The manager hired a sales director who knew little about the Roanoke market. After just a few months on the job, she booked more summer group business than this hotel had ever seen. The manager completely forgot to tell her to concentrate her efforts on the fall and winter because summers were very poor.
All hotels operate in a competitive environment; smart hoteliers take advantage of that. Competition is a good thing if you learn from it.
|Also See:||Are You Still Discounting? You Might Gain Some Occupancy, But Lose RevPar to Your Competition / Neil Salerno / December 2004|
|Are You Being Out-Hustled By Your Competition? How to Dominate Your Hotel's Market Set / Neil Salerno / December 2004|