Hotel market analysis is the process of using external data sources to provide insight into customers, competitors, and the business environment of a hotel. Unfortunately, it can be an extremely time-consuming and challenging task if you don’t have the right tools to support you. You essentially have to manually collect disjointed data from multiple sources, then compile it into a manageable, usable format.
But, despite the headache of sorting through messy data, building an accurate and comprehensive market analysis for your hotel can be the key to precisely targeting marketing efforts, maximizing property revenue, and planning for conscious growth.
In fact, we’d argue that knowing your market is absolutely essential to keeping a hotel profitable.
So, how do you conduct a market analysis? How can you put your findings to good use once you’ve got them? And how can you manage all of the data you collect from scattered sources in the long run? This quick guide will give you some actionable answers and get you started on your market analysis journey in no time.
First, why do hotels conduct market analysis?
Market research enables hotels to gain insight into potential guests and the business landscape they’re operating in by providing key decision-makers with fact-based research on competitors, travelers, and the local market. Data-driven analysis provides market context for nearly every decision you’ll make. While there's a near-endless amount of applications for your market analysis data, we’ve come up with a couple to get you on the right track.
Crafting a marketing strategy
One use of market analysis in the hospitality industry is that of building a well-targeted marketing strategy. By determining who your customers are, where they’re from, and why they're traveling, you can develop a data-led strategy for targeting customers and offering tailored packages and promotions. You can use your research to find people who look like your best customers, then craft messaging that appeals to them.
In conducting market analysis, you can gain insight beyond your current customer data and understand how prospective guests view your hotel. Then, you can explore new market opportunities and attract new customers that have previously only stayed at your competitor’s properties.
Market analysis also allows you to check out how your competitors attract guests. Once you have a basic understanding of who your competitors are and how your hotel fits into the market, you can better target messaging and build a strategy to attract new customers.
Building revenue strategy
Building a revenue strategy is extremely challenging if you don’t have market data to provide context to your internal data. Using market analysis to provide this context when building your revenue strategy can be a game-changer and make your job a lot easier.
Diagnosing market trends will, for example, provide a valuable foundation when setting rates. With a better understanding of your local market, you can more accurately attribute revenue changes to external factors, like competitors or local events, instead of solely focusing on internal statistics. Market analysis will also enable you to better forecast future revenue, helping you analyze how expected changes to the business landscape might affect your revenue, and plan accordingly.
How do hotels conduct market analysis?
At first, market analysis can seem daunting. While there are a number of approaches you can take to your research and analysis, there are five key areas of analysis you should be aware of before getting started.
To gain a holistic view of your market, it’s important that you take each method into consideration. While you may want to begin with a more narrow scope of analysis, you’ll find that utilizing all of the data and tools available to you will yield the most accurate marketing messaging and revenue forecasting.
Let’s get started.
Market performance analysis
Market performance data analysis is a good place to start. Your hotel’s market performance is the occupancy rates of your hotel in comparison to the hotels in your surrounding area, country, and region. This research will give you a better general understanding of the market and allow you to determine your success within it.
To assess the market performance of your hotel, you’ll need to get a hold of data on occupancy, average daily rate (ADR), and revenue per available room (RevPAR) of your local competitors. You can often find competitors' data in press releases or in industry reports, like those conducted by Smith Travel Research. A good hotel Business Intelligence (BI) tool will integrate industry reports into your market analysis automatically.
Whether you’re in charge of multiple properties or one hotel, you need to analyze the destination of each location individually. Why do people travel to your destination? Do they primarily come for business, leisure, or events? Where are people traveling from? Answering these questions helps you fully understand the sources of your business and the customers you’re trying to attract.
But, how do you find destination data? There are a couple of places you can look. First, you should get in touch with your local tourism or visitors organization to find statistics. Second, research local airports. You can often find passenger data on their websites that you can use to develop a stronger picture of the breakdown of incoming passengers’ origins. This information will help you gain valuable insight into your audience segmentation.
Audience segmentation and destination analysis work hand in hand. Once you have a solid foundation of knowledge of your destination, you should take your market mix or type of travelers into consideration. Here are the three main customer segments for the hospitality industry:
- Business Guests
- Leisure Guests
- Group Guests
If your destination attracts more international travelers than local visitors (like many destinations in the Middle East), you should take your hotel data analytics a step further and break down guests by national origin. Understanding where your guests are traveling from will help you accurately target your marketing and build a personalized guest experience.
Once you’ve gathered data on your market performance, destination, and customer segmentation it’s time to take a better look at your competitors. You can break down each competitor into one of two segments:
First, you’ll want to look at local competitors that are running hotels of the same type as yours. For example, if you’re property is a casino resort, all of the casino resorts in your area will fit into this category.
The second group is determined by proximity. Take a look at all of the lodging options in the immediate surroundings of your property. This includes hotels, hostels, motels, and Airbnbs.
Once you have a general list of your hotel’s competitors, you’ll need to generate a more in-depth summary of them, including these details for each property:
- Hotel name
- Hotel type
- Number of rooms
- Brand affiliation
- Star rating
- Reputation and review site scores
- Website URL
You can find competitive information on travel sites such as Hotel Finder, Bookings.com, and TripAdvisor. Once you’ve gathered your basic competitive summary, combine it with market performance data, such as competitor ADR and RevPAR, to build a holistic understanding of your competitors.
It's important that you don't ignore hotels that are planned to open in your area. New hotels will increase the number of rooms in your area and affect your market share. New competition and too many rooms can lead to decreased occupancy rates and an overcrowded market.
But don't fret yet — new hotels can be a positive thing! New construction can be a sign of the increased popularity of your destination and new properties can increase local visitor traffic, driving growth for your hotel.
Hotel market analysis doesn’t have to mean long hours of collecting siloed data and combing through endless spreadsheets. Utilizing hotel data management tools for data extraction, marketing, and business intelligence can take the headache out of your research. Centralize and organize all of your data with powerful software, like Intouch BI.
Request a product tour today to see how InTouch can make your market analysis much, much easier.