15 March 2012 7:15 AM
By Carter Wilson
Director, STR Analytics
- Forty-five percent of the properties the average hotel names as competitors actually name them back.
- Occupancy, rate and revenue-per-available-room indexes are the entire reason comp sets even exist.
- Having multiple comp sets allows a property to more fully understand their competitive environment and, perhaps, more effectively operate and increase their share within that space.
Last summer, STR Analytics, a sister company to HotelNewsNow.com, embarked on a never-before-performed task: analyze the more than 30,000 competitive sets across North America and try to get an understanding of how competitors are chosen. From that analysis, a Comp Set Study (to be released soon), a comp set grading model and an entire range of new comp set advisory tools were born.
Many interesting and unexpected facts were gained from the study, such as only 45% of the properties the average hotel names as competitors actually name them back.
More insights can be gleaned by looking into the behavior of properties and their competitive sets. Recently, STR Analytics used the competitive set data to understand how certain groups of properties perform in terms of indexes.
Occupancy, rate and revenue-per-available-room indexes are the entire reason comp sets even exist. These are the measures by which properties are ultimately judged (and performance bonuses paid), and the selection of an appropriate comp set is the cornerstone that everything else is built upon. With all the time and energy put into choosing the right competitors, the question eventually is asked: does the average property under- or over-perform its comp set?
Conventional wisdom might dictate that the average property over-performs its comp set because all else being equal, most hotels (the thinking goes) would choose poorer-performing properties as their competitors, thus inflating their own index levels.
An analysis of more than 30,000 primary comp sets and their trailing 12-month performance (through January) reveals the following index levels for the average hotel:
Performance Indexes for the Average Hotel
Source: STR Analytics
So that myth is dispelled, at least in terms of primary comp sets. The RevPAR index for the average hotel is just under 100%, so it doesn't seem that hotels are "loading" their sets in order to make themselves look good. In fact, only 45% of all hotels reviewed had a RevPAR index of more than 100%. But this analysis warrants a closer look at the data, so the next step would be to look at the same set by class. The results are the following:
Average RevPAR Index per Class
Clearly, the upper-tiered hotels are bringing up the average, with the upper-midscale segment and above each registering a more than 100% RevPAR index, with luxury properties achieving the highest index of all groups within their comp sets. Midscale and economy properties achieve less than 100%, with economy hotels averaging a RevPAR index of 85%. There is sense to this: higher-end properties typically name hotels in classes lower than their own as competitors, and vice versa.
Generally speaking, properties that have more than one comp set are more complex in nature and tend to make greater efforts to understand the competitive universe in which they exist. Does this level of sophistication translate into a higher RevPAR index? The results found by STR Analytics are the following:
|Number of Compsets||Occ Index||ADR Index||RevPAR Index|
Source: STR Analytics
Properties with two or more comp sets are more likely to have higher RevPAR indexes (in their primary comp set), with the highest average index of 109%—primarily driven by rate—recorded by hotels with three comp sets. Having multiple comp sets allows a property to more fully understand their competitive environment and, perhaps, more effectively operate and increase their share within that space.
Finally, what is the relationship, if any, to RevPAR index and how many times a hotel is named as a competitor by other properties? The results are detailed in the following table.
Average RevPAR Index Per Nameback Amount
As shown, the more a property is named as a competitor, the higher its RevPAR index tends to be, and this is a progression. Those properties not named as a competitor by any other hotel have an average RevPAR index of 93%. This increases with each time a property is named, and those hotels named as a competitor by five or more other hotels have an average RevPAR index of 103%. Thus, it would seem that most properties are in fact aware of the strongest competitors in a market, naming those top performers the most often.