Why comp set data is essential in hotel revenue management
And why you should use a revenue management software which incorporates comp set data.
Revenue managers rely on data to make their day-to-day decisions and form long-term strategies. Of course, the better and more reliable their data is, the better their decisions and the hotel’s results. Thanks to the great development in the hotel technology space, affordable and automated Revenue Management Systems (RMS) has become available for all types of hotel properties to monitor and analyze the comp set data for you. While everyone agrees on the importance of data, both hoteliers and hospitality tech providers sometimes have different ideas on which data revenue managers should take into consideration in their revenue management tactics. Atomize has built its RMS based upon the philosophy of using both primary data and secondary data in the pricing algorithm. In this article, we dig deeper into why this is the most efficient and smart way to handle your pricing tactics to understand your positioning in the market. But first, we look at the basics of primary and secondary data and the comp set’s place in the revenue management puzzle.
Winning with data in revenue management
Primary data: internal information about your property e.g. current and historical reservations and cancellations to determine RevPAR (revenue per available room), ADR (average daily rate) and the booking pace and cancellation rate. Secondary data: external market information revealing the demand, for example, search patterns and non-bookings on specific dates, local holidays and comp set data. In other words your most important direct competitors’ room prices, occupancy and overall performance information. While some voices argue that only primary data should be considered when setting a hotel’s prices, the majority of the hotel industry expert community agrees that in precision price management both primary and secondary data need to be considered. To Atomize, ignoring insights into your competition is like driving on a dark country road without your high beams on. Let’s find out why.
What is a comp set?
Comp set information is one of the most important secondary data for a hotel. The primary comp set usually consists of a group of up to 10 hotels which you see as direct competitors to your own property. These are the hotels you think guests compare you against when making a booking. To determine your primary comp set, you can refer to the ‘4 Ps’. Product – which hotels in your market offer the most similar product to yours? This can include services you offer, amenities such as restaurants, recreational spaces or meeting facilities, as well as your property’s overall style and design. Proximity – especially in a busy market like a city or a popular holiday destination, nearby hotels are your key competitors. Think about which other hotels are close to the convention centre your business guests go to or which properties like your own are near your city’s major attractions. Pricing – hotels with rates similar to yours should be in your comp set because bookers will compare your offerings and the value for money you provide when they make a reservation. Positioning – consider which other hotels are in your category (e.g. budget, upscale, luxury…) and are targeting the same or similar guests as you (e.g. leisure, business, groups…). Using these ‘4 Ps’ as a guideline helps when identifying and mapping out your competitors.
Why is comp set data important to consider for hotels?
Using your own data to determine your pricing strategy is a great place to start since every hotel is unique and deserves a tailored approach. However, if you want to succeed in a real-time and dynamic market where properties compete fiercely for guests, it’s important to also consider competitor intelligence data in your pricing management. In this section, we will look at four common areas, in which comp set data plays an important role in revenue management tactics. We will also dig deeper into how a Revenue Management System (RMS) like Atomize takes comp set data into consideration and what you can gain from letting a revenue management software optimize and adjust your prices.
Understand your relative performance and positioning in the market
Knowing how your competition reacts to changes in demand is important when forming your strategies and setting your rates. The purpose is not to become a price follower who copies what everyone around them is doing. Instead, the aim is to monitor the competition so you can identify your rates in relation to the competitors, which is one piece of the puzzle in better understanding your relative performance and positioning in the market. Whenever your property is doing exceptionally well or poorly, it’s important to look around. Are you and your competitors losing out on business because a big event got cancelled? Or is the market doing fine and your rates are just way too high? When using Atomize, the system continuously assesses your current performance at a certain price point versus your competitors. This helps you identify your relative performance and better understand your property’s positioning in the market. For example, if your pick up pacing is good and as expected, but at a 20% higher price level than your comp set, it should simply make you ask yourself if your perceived positioning in the market is really in line with reality – maybe you are competing in a more premium segment? The Atomize pricing algorithm is built to strive for the most accurate price point and optimal performance to maximize your revenue. To identify the optimal performance, the pricing algorithm continuously tests different price points and positions in the comp set to access untapped demand. Here is a typical example of how the pricing algorithm could behave:If Atomize calculates a price based on primary data of € 100 for a room and it turns out that there is a competitor who has € 99 at the moment for the same date and room type, the system could test lowering it to € 98 to see if it can access untapped demand. If not, Atomize raises the rate back to € 100 or alternatively tests a higher price point to see if the pacing slows down. If it doesn’t slow down, Atomize could try to raise the price again and so it goes on to find the optimal price depending on where in the booking window you are in relation to the occupancy rate at that time.
Understand your price elasticity and create improved pricing strategies.
By looking at both primary and comp set data, you can get the most complete picture of your market which in turn helps you form sustainable pricing strategies you can rely on. This broad perspective helps you take more data into account when setting rates and create a more well-rounded approach. When using an RMS like Atomize for your price setting, all the historic comp set prices are being stored, and the system automatically analyzes and identifies your competitors’ pricing strategies over time. Based on the software’s machine learning, it can predict pricing fluctuations in the market and set more precise and refined price points over time.
Get ahead of your competition
Keeping an eye on your competition and understanding their strategies and performance can help you get ahead of them. For example, wouldn’t you want to know if you were the only hotel in the area with rooms left to sell on a specific date? That sounds like an opportunity no Revenue Manager wants to miss out on, but without automatically monitoring your comp set, you’d never know. With Atomize, the system will automatically keep track of the competitor’s occupancy and price changes at any time. In a case where your competitors don’t have any inventory left, Atomize will, in relation to the booking curve and occupancy rate at this very moment, take advantage of this revenue opportunity and the possibility of a higher price elasticity and thus raise the rate and see if the desired pacing/pick-up rate can be maintained. To make sure you never miss out on a revenue opportunity, Atomize tests different several price points within seconds. Don’t do it alone – Revenue Management Software helps!
Comp set data in your Revenue Management System
To get the total picture of your comp set environment and continuously monitor any changes in the comp set data, you will need an Automatic Revenue Management System like Atomize, which monitors your comp set data according to your competitor mapping, uses this information to adjust rates via a pricing algorithm and gives you easy access to comp set data points. A successful approach to revenue management is nearly impossible without the use of the software. At the very least, manual revenue management leaves room for human error and is a tedious task. Even if it is your full-time job, you’ll miss out on revenue opportunities without automation around rate shops and comp set data. Now that we’ve made our case for the importance of keeping an eye on your comp set as well as your primary data, what do you think? Would you rather work with just your own information or use a 360-degree perspective to create a solid and reliable pricing strategy that will put you at the top of your market? Contact us and we will tell you more about how Atomize RMS can automate your pricing tactics >comp setrevenue management system