When making decisions that impact your business growth, benchmarking plays a crucial role in measuring your performance against your competitors.
In short, benchmarking is the process of identifying and learning industry best practices and applying that knowledge to improve your business’ performance.
The importance of benchmarking in the hotel industry
Benchmarking lets you peer over the walls of your own property, to uncover strategies, and assess what’s working, and what isn’t, so that you can apply that knowledge to your own commercial playbook.
This is true for all types of hotels; from hotel chains, and luxury five-star hotel brands to serviced boutique apartments. Whether it’s on service, guest experience or a glowing review, hoteliers make decisions and set strategies to win market share by understanding their revenue performance and market potential, in relation to their competition.
For revenue managers, there has been a real shift in the landscape, making benchmarking an even more important tool to turn to. Faced with more layers of complexity, and fast-moving competitors, it has become more difficult to track how your performance measures up against your market in a way that matches the dynamic nature of the modern hotel industry landscape.
So what does it take to implement effective benchmarking in the current hospitality market, and how can you use benchmarking effectively to optimise your hotel’s commercial strategy to drive growth and profitability?
Leveraging high-quality data for effective hotel benchmarking
At the heart of effective benchmarking is high-quality data. Manual data collection and analysis take too long, especially with smaller teams, as the new normal, and constant pressure on commercial teams to make quick decisions in rapidly changing markets.
Your benchmarking efforts will not be worth the investment in time without a tech solution that extracts and collects the necessary internal and external data, and brings it to the surface in a timely, efficient and comprehensive way (thereby shortening your time-to-insight).
To effectively benchmark and take the correct action, it's crucial to use performance indicators that have a level of granularity that enables you to drill down into information around your KPIs, then comparing them to your compset. These detailed insights will help you uncover the true benefits of benchmarking and guide your decision-making process.
Typically, when using a benchmarking tool, you might spot an anomaly such as competitor restrictions, sold-out events, unsecured bookings, or promotional campaigns, that would trigger a question and warrant further investigation. You might be examining your performance against other competitors and spot trends on occupancy, ADR or RevPAR over time.
These trends might reveal days or periods of time you would like to dive deeper into in order to understand the factors driving them. By understanding these trends, you can see if they are being led by group bookings, events, channel strategies, or promotions, among other factors.
Additionally, by using market share indices, you can check that you are getting your fair share of the market. These include your MPI (Market Penetration Index), ARI (Average Rate Index) and RGI (Revenue Generation Index). When monitored regularly, these KPIs can be utilised to track your compset's performance, giving you a better understanding of their long term strategy, and how their actions impact your hotel.
Importantly, these insights provide you with the necessary information to implement your own action plan that will improve your performance, either by establishing your own restrictions, launching promotional campaigns, or adjusting rates to better compete in the market.
Perhaps you have noticed shortfalls in your forecast, where one of your KPIs is underperforming against your budget. You may notice through your business intelligence solution that there is an underperforming segment, for example.
Is the rest of the market facing the same issue, how are your compsets performing in that particular segment? These are questions that you would need to interrogate further.
A deeper analysis may reveal the reasons behind this. It could be that you're filling up too quickly with low rates, lowering your ARI, or perhaps your competitors are offering appealing deals and packages that are giving them a boost.
Market factors might also be at play, or there is a competitor getting more than their fair share of the market.
Whichever the case, by having access to real-time market and compset benchmark data, you can implement a promotion or marketing campaign to make sure your property is not performing below the market in any segment.
Determining the effectiveness of your strategy is crucial for success. It's about identifying shortfalls and ensuring that your current approach is the right one. To do this, it's essential to understand the reasons behind any performance gaps and to evaluate whether your strategy is yielding a fair share of the market.
Unless you see a pickup in your own property’s bookings, any opportunities that other hoteliers might be seeing become very difficult to spot. In that case, being able to identify new opportunities in your market provides you with a unique window to discover new revenue possibilities.
It could be that you suddenly notice your compset rates increasing, or an LOS restriction in place. Why? A benchmarking tool helps to find these answers so that you can easily target a previously unseen opportunity.
Assessing your position relative to your competitors can also help you decide if adjustments are needed for better occupancy, ADR, RevPAR or other key metrics. You can analyse whether you need to modify your long-term or short-term strategy to regain market share from competitors or even target specific business segments more effectively.
By taking these steps, with data as your guide, you'll be better equipped to make informed decisions and drive success, even in a highly competitive landscape.
Benchmarking allows you to dive deeper into the state of your business to uncover the reasons behind different business results. By knowing what sets your competitors apart, you can spark fresh initiatives and inspire new strategies for your hotel.
It's not about copying every move they make; it's about learning from their successes and adopting relevant and fitting practices to boost your property's performance. It’s also not always about shortfall; sometimes, confirming that a strategy is working is just as important.
Whichever KPI you may be looking to target, you and your stakeholders require real-time quality data that not only shows the state of play, but pinpoints exactly where any action should be taken, and guides you on where to initiate problem-solving.
A best in class benchmarking tool should enable you to endorse your past strategies and optimise your future strategies, based on what is happening in your market and your compset.
Benchmark Insight is the game-changing benchmarking solution for hoteliers seeking to outshine their competition. Built using the industry’s most trustworthy and reliable data, this tool enables hoteliers to better analyse the performance landscape in their market, leading to improved overall hotel performance.
By comparing your revenue performance against your compset, you will gain valuable insights into your market, allowing you to make strategic adjustments with confidence. Benchmark Insight enables you to use past performance to inform future strategies, and effortlessly track your KPIs against your compset as well as the wider market.
This instant clarity on your competitive position will prove invaluable in driving success at your hotel.