Ms. Knutson

Sales & Marketing

The $64,000 Question: Who Really is Your Hotel's Competition?

By Bonnie Knutson, Professor, The School of Hospitality Business/MSU

No matter how game show formats might change over time, the design remains the same: If you answer the question correctly, you win a prize. There is a strong similarity between this game show design and the hotel business today - especially as it relates to identifying your competition. If you can answer the BIG question, you can win the prize. And the BIG question is: Who, really, is your competition? The prize, of course, is increased sales and increased profits.

Unfortunately, many hotel managers and owners don't know who their competition actually is. Oh, they confidently give you an answer when you ask them. And it's probably based on the Star Report, scouting other hotels' reader boards, or additional covert actions. But, more often than not, that answer is incorrect or only partially correct. Why? Because the hotels which management identify as competitors are identified from management's perspective, not from the perspective of the people who truly know the answer: your guests. An example: A hotel with an upscale seafood restaurant was developing a new three-year marketing plan for its eatery. When I started working with them, one of my first questions was, naturally, "Who is your competition?"

Their reply came quickly and confidently. "Oh, that's easy. We're up against 'Restaurant A' and 'Restaurant B' and other fine dining places like these.

"Are you sure?" I asked.

"Oh yeah. Our competitors are all the fine dining, white tablecloth, upscale seafood restaurants in town."

But when I asked their guests (both hotel guests and locals), however, the answer to the competition question was quite different. To them, the competition was not 'Restaurant A' and 'Restaurant B' and other fine dining, white tablecloth, upscale seafood restaurants in town. It was Red Lobster.

For years, the managers had been planning, strategizing, and marketing under a wrong premise. All the resources which they targeted against the competition were targeted against the wrong enemy; the "troops and artillery" were not aimed in the right direction. As a result, they weren't as effective as they should have been and the MROI (Marketing Return on Investment) was not as high as it could have been. While the overall business was profitable, the hotel could have captures more of its in-house guests and area market if their marketing decisions had been based on the reality of the customer's perceptions rather than the illusion of management's perceptions.

Unfortunately, this scenario is duplicated in far too often in the lodging sector - Hotels, Motels, Resorts, Inns, Bed & Breakfasts. No segment is immune to this potential gap between management perspective and guest perception. If the guest is always right and you, as owner or manager, don't see exactly what your guest sees, then you are always wrong. It is as simple as that. Perception is reality. If a family believes your rates are too high, then they are too high (even if your prices are the same as every other property in your area). If a meeting planner believes your sales people aren't attentive, then they aren't attentive (so what if they shower the client with telephone calls, emails, follow up meetings, site visits, and lunches). And if the guests of that hotel's upscale seafood restaurant believe the competition is Red Lobster, then it is Red Lobster. Perception is reality.

The only way for you to find out who really is your competition is to ask your guests. While a full market research study can give you a myriad of valuable in-depth information about your hotel and/or its competition, there is an easy way for you to immediately begin identifying your true competitors. The next time you or some one on your staff is talking with your quests (or potential guests), ask them the business version of The $64,000 Question: "If you hadn't stayed with us today (or held your event here or come to our restaurant), where would you have gone? Then, follow their answer with, "Why?"

The first part of this question will identify who your guest sees at his or her top-of-mind alternative to coming to your property. It will identify your major competitor(s). Visualize a group of ladders in your guests' mind. Each ladder represents a different product category - i.e. business trip, weekend getaway, family vacation, meeting, or other special event. Each rung represents places where your guest believes he or she can go for that particular occasion. When you ask your guests where they would have gone if they hadn't come to your hotel, they name the place which, in their minds, is on the rung closest to you; i.e. who they think of as your primary competitor. And, remember, perception is still reality.

A hotel may, of course, have several major competitors, depending on the occasion and market segment. Stratifying your guests' answers along these dimensions will give you a clearer picture of who you are really up against in each category. Guests' responses to the second part of the $64,000 Question - the Why part - will tell you what your customers see as your competitor's strengths. And, often, it is not what you may think. In the case of the Red Lobster example, its strength was seen as a place where you could dress casually. Once you know, then, what your competition's perceived good points are, it is easier to develop effective operational and/or marketing strategies positioning your hotel as a better solution to your guests' needs.

In this increasingly competitive and challenging economic environment, when every hotel is chasing every guest dollar, management can't afford to use the shotgun method of marketing. Even the rifle approach is becoming obsolete. The successful brands will be using a laser technique to better aim their brand's experience and message at their guests' needs, wants, expectations, and perceptions. Knowing who your competitors really are is a necessary component of profitably hitting your target markets.

Your REVPAR will thank you!

Bonnie J. Knutson is a professor in The School of Hospitality Business in the Broad College of Business at Michigan State University. She is an authority on emerging lifestyle trends and innovative marketing. Her work has been featured in The Wall Street Journal, USA Today, and on PBS and CNN. She has had numerous articles in industry, business, and academic publications. Bonnie is a frequent speaker for executive education as well as business and industry meetings, workshops, and seminars. Dr. Knutson is also editor of the Journal of Hospitality & Leisure Marketing. Ms. Knutson can be contacted at 517-353-9211 or drbonnie@msu.edu Extended Bio...

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