Understand the Fundamentals of Hotel Benchmarking

Benchmarking is a common practice in almost all types of business.

However, this is not an easy feat, until and unless you understand data and have time to invest. And maybe this is the reason why many businesses overlook benchmarking.

Okay, forget about other businesses.

Let’s talk about benchmarking in hotels.

Did you know that benchmarking plays a major role in hotels too? If not, never mind; I will let you wrap your head around this quirky hotel business affair.

Ever since hotels started leveraging data to elevate their business, they also got exposure to various other elements, and benchmarking is certainly one of them.

Initially, it wasn’t really a must-have for hotels but with time and increasing competition, benchmarking became crucial.

But what is it really and how can hotels leverage it? All of it, we are going to discuss in this blog.

So, without further ado, let’s take a deep dive and decipher the basics of hotel benchmarking.

What is Hotel Benchmarking?

Hotel benchmarking is about assessing and comparing your hotel’s performance with the industry’s best players and the top competitors. The reason to do this is to determine where you stand in the market and how you can improve your overall business.

Simply put, the benchmarking method is used for the quality evaluation of a property in the hotel industry.

Let’s understand more about this and its significance in the bigger picture.

Why Is Benchmarking Good for Hotels?

In the hotel business segment, you need to understand the market and the factors that are involved. It could be the risk factor or even the benefits you are likely to reap.

This is, however, not possible when you don’t follow a certain process and that includes assessment and comparison.

Benchmarking is a fantastic way to learn about the space you’re venturing into or already operating in.

For example, you may think your hotel had done a great month, but what if everyone else did much better than you?

This is exactly what benchmarking clarifies for you.

No doubt, you must celebrate a successful profitable month; after all, it matters.

But from a business perspective, you have to look for the bigger picture. Small profits may seem nice initially, but to compete in an industry that keeps on evolving, you need to learn more in-depth.

The benefits of benchmarking in the hospitality industry are immense, and big hotel brands are great examples of it. They keep on evaluating their property and whenever it is needed, they make significant changes in the way they operate.

Not to mention. Small and medium-sized hotels can also reap the benefit. All they need to do is play it by the book.

Tips to Get Better at Hotel Benchmarking

Hotel benchmarking is a vast topic to cover at one go and it might overwhelm you. So, keeping things a little light, I am walking you through the basic yet most imperative tips.

If you get better at them, you can ace the advanced benchmarking methods as well.

1. Understand the market standard

The market you target and operate in is the major source of information for your business. Meaning, you must know the ins and outs of it.

Knowing whether the market is embracing new trends is going to make your benchmarking process a little smoother.

Not just that.

You also need to perform forecasting and identify trends that are likely to emerge in the coming months or years. And then, determine whether your hotel is prepared for it. If not, find ways to keep things aligned.

2. Know who you’re competing against

The next prominent aspect of benchmarking in the hotel industry is knowing who you are competing against in the industry.

Have you ever seen boxers preparing for a match? It’s not just their technique, but they also sit with their coaches to understand their rivals. Analysing what their rivals are good at and what they lack enables them to better prepare for the end game.

This goes the same with hotels as well and you as a hotelier must invest enough time and effort to learn about your competitors in the industry.

If you want to learn how to do it the right way, we have a dedicated piece of article on this — How to Perform Hotel Competition Analysis?

3. Learn about the relevant metrics to consider

Data is at the heart of hotel benchmarking.

No, wait. Let me put it differently.

Not all data is at the heart of hotel benchmarking.

Of course, it is fantastic to have access to various types of hotel benchmarking metrics. But we must understand that not every piece of information is important. Some might just waste time.

Meaning, you have to consider only the relevant metrics.

For most hotels, occupancy rate and ADR are two metrics that can’t be overlooked. However, you can still stretch a bit by adding metrics like RevPAR, ALOS, direct channel performance, OTA performance, market penetration index, etc.

Selecting and tracking the right and relevant hotel benchmarking metrics provides you with a strong base to make informed decisions. In turn, you get to improve the guest experience, increase bookings, and maximize your overall revenue.

4. Narrow down on the data as much as possible

Going broad on your data analysis will make things a little complicated for you. So, to make the analysis effective you need to narrow it down.

For example, if you’re trying to analyse the market penetration index, don’t do it generally in a broad or vague sense. Rather, narrow it down to a specific demographic. Maybe you want to know the outcomes based on location or maybe you want it by guest segment.

Whatever is the case, make sure you’re specific with your analysis. The more you drill it down, the better insights you’re going to get.

5. Compare your findings with past data

Comparable data is crucial when you’re performing benchmarking for your hotel.

I am sure you have some sort of data from the past or prior periods. It might not be as insightful as the current one but never mind.

And now, when you get insights from your current data, the next thing you need to do is compare both of them.

Comparing data not only offers hotel businesses context to understand growth patterns and trends but also establishes reasonable projections.

And this brings me to the next point.

6. Outline a roadmap for future operations

Now that you have a realistic projection, it’s time to prepare an outline of the roadmap ahead.

What are the aspects you’re going to work on?

What are the strategies you’re going to implement?

Are you going to focus more on direct reservations or OTA bookings?

How do you plan to penetrate more in the market?

Various other questions arise. And you as a hotelier must have an outline in place to address all of them.

Outlining your roadmap allows you to construct and organize strategies in a sequential manner and effective flow.

7. Measure your performance

Last but not the least, your results must be measurable. If it’s not, then you cannot improve further.

Upon all the actions, you need to measure your performance. The reason is, performance measurement helps hotels identify their strengths and weaknesses, top high performing aspects, and areas for improvement.

If your numbers don’t come out the way you expected, you might want to go back and tweak things. If they are up to the mark, then you must raise the bar and try achieving something bigger.

The hospitality industry is highly competitive and to foster improvement, you need to form allies with performance measurement.

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