What is Benchmarking?
Benchmarking is the process of comparing your performance against the competition, adding a layer of context to what success and failure looks like in your circumstances and environment. The key to unlocking this level of understanding? Historical performance data, both yours and that of the competition.
Definitions normally make more sense when there’s a case study or example to wrap your head around, so we’ll offer this through the prism of hotel benchmarking. With the world’s largest hotel data sample, STR enables properties and portfolios across the world to gain an understanding of their performance levels in relation to their market or competition and make confident, informed decisions.
The benefits of competitive benchmarking
Take out the guess work and forget about speculation, benchmarking your key performance metrics helps you answer the critical questions. After all, you can’t argue with the cold, hard historical numbers. How does your occupancy compare with the competition? Which days of the week best yield revenue? How are changing market conditions affecting your performance?
One of the great benefits of benchmarking comes in identifying gaps in your market and opportunities for improvement. Once you’ve answered questions like those above, you can begin shaping your marketing, pricing and operational strategies to ensure they are optimized for success. These small tweaks to your business processes could lead to sizeable strategic improvements.
Applying benchmarking to your hotel
Whatever your role or department, understanding how your performance measures against the competition empowers you to make data-driven decisions and create effective strategies.
A test-and-learn approach is vital for revenue managers when it comes to developing competitive pricing. Benchmarking data enables an understanding of demand levels for specific offerings as well as the opportunity to test different rates to determine which are most effective in generating demand for each business segment.
Hotel A vs. Hotel B – an example of benchmarking in practice
At first glance, you’d probably be tempted to say Hotel A is outperforming hotel B. But not everything is always as it seems.
If hotel A and B operate in the same market and have similar pricing, property type and amenities, then hotel A can count that month’s performance as win—reporting a 7% increase compared to its competitors 3% decline.
But what if they’re operating in two different markets?
Hotel A might have reported 7% growth, but when the competition increased at an average of 15%, benchmarking highlights that this property wasn’t able to captialize on the market’s growth as effectively as the competition. Back to hotel B, in the context of the competition’s 10% decrease, a 3% decline suggests that the property is actually ahead from a performance perspective.
Without benchmarking and the context this offers, hotel A and B would most likely be blissfully unaware and unnecessarily concerned, respectively.
How STR can help you understand the wider picture
If you’re looking for insights into the competition, we offer two options—one free, one paid.
Hotels seeking marketplace insights can receive a free report on their market simply by submitting their data to STR. But for tailored insights, dSTAR offers unrivalled insights into a set of competitors that you select—known as your competitive set.