How to create a better comp set
24 AUGUST 2015 7:52 AM
Here are five ways to refine your comp set, according to a speaker at the recent Hotel Data Conference.
NASHVILLE, Tennessee—Comp sets can be an invaluable tool for hoteliers when it comes to sizing up the competition. But they also require constant monitoring and management.
Ali Hoyt, senior project manager for STR Analytics, sister company of Hotel News Now, provided tips to refine your comp set during the recent Hotel Data Conference.
1. Understand comp set composition
To start, Hoyt said it’s important to understand the composition of a comp set. According to STR guidelines, a comp set in the United States has as few as three properties (the minimum required) and as many as 29 properties.
No single property or brand can account for more than 40% of total participating room supply, and no single company can account for more than 60% of the total participating room supply, Hoyt said.
The average comp set size is between five and six properties. The average number of times a hotel is named as a competitor is 5.2, and the average number of properties in a primary comp set is 5.4, she said.
2. Consider multiple sets
When is there a good time to add a secondary or tertiary set?
Hoyt said there are several different purposes for additional comp sets:
- Regional: When a hotel isn’t necessarily fighting for the same customer but goes farther out to see how others are performing in the region;
- Local: Honing in on one particular location;
- Aspirational: A comp set that shows a level the property aspires to (such as looking at a set after a planned renovation);
- Niche: This set ignores geography and focuses on a similar product (i.e. Colorado ski resorts);
- Seasonal: This comp set would be for seasonal properties (i.e. Upstate New York);
- Group and transient mix: For hotels that cater to groups, it might be important to have a comp set that is solely focused on group business to see where the competition is for that business mix.
In general, Hoyt said, upper-tier hotels have multiple comp sets. Of luxury and upper-upscale hotels in the U.S., 36% have two comp sets, and 16% have three or more comp sets. For the total U.S., 91% have only one comp set.
3. Understand how to benchmark your comp set
Hoyt said this is actually a new idea. “You’re using your STAR report to benchmark your performance, but how can you actually benchmark your comp set against other comp sets to make sure you’re in the right comp set?” she said.
STR, parent company of Hotel News Now, can grade comp sets to help hoteliers determine if their properties are in the best possible set. Most comp sets fall into the B and C range. Of the 30,000-plus comp sets in its database, 46% earn a B grade, and 33% earn a C grade.
The grade is based on nine criteria:
- comp set average daily rate spread;
- class variance;
- nameback percentage;
- occupancy standard deviation;
- ADR standard deviation;
- revenue per available room standard deviation;
- average distance;
- room count variance; and
4. Recognize opportunities to improve
Where can you improve your set to see more depth in your comp set and understand better performance at your property and surrounding properties?
“You should be looking at your comp set frequently and reevaluating whether it still works for your hotel or not,” Hoyt said.
On average, 58% of hotels have changed their primary comp set within the past five years (from 2010 through 2014).
“Now five years is a long time. If there’s been a lot of new supply coming into the market and you haven’t changed your comp set, that’s probably a bad thing,” she said. “But for the most part, hotels are changing their comp sets about twice over that five-year period. …
“This is just a reminder to continually look at your comp set and understand what hotels have opened, which hotels have been renovated and how does that change what properties you have in your comp set. Because this is an ever-evolving task to manage your comp set that is often overlooked,” she said.
Hoyt also urged attendees to get information on which hotels are in their reverse comp sets, as these can change.
“Find out who’s seeing you as a competitor and whether that makes sense for your property,” she said.
She said it’s also important to be aware of flaws of your comp set if it can’t be change. If you can’t change the set because it’s written into a brand contract and it’s beyond your control, you can work to at least understand the weaknesses within your set. Then, you can figure out how to account for those flaws when you are looking at your monthly performance data and doing your benchmarking, Hoyt said.
5. Use all available tools
Whether those tools are internal or external, Hoyt said hoteliers should use all the tools at their disposal.
“Make sure that you’re taking full advantage of everything that you have at your fingertips,” she said. “That includes your comp set and making sure that you’re in the right comp set so you can use all of those tools properly.”