How should a hotel competitive set be constructed?

The mechanics, and why the rules exist

Every benchmark index — occupancy share, pricing power, revenue share — is simply your number divided by the peer group’s, times a hundred. Which means the peer group is doing all of the work, and the comparison is only ever as honest as the set behind it.

Hence the integrity rules: at least four properties, at least three of them unaffiliated with you, and no single brand dominating more than half the supply. Without them, the index is not measuring your performance. It is measuring your choice of comparison.

The gaming patterns, which are rarely deliberate

Almost none of these are cynical. They are what happens when a reasonable person picks the comparison that feels right to them:

• Stacking the set with weaker properties, so your index flatters. Almost nobody does this cynically; it happens because the weaker hotels genuinely do feel like the right comparison.
• Including your own affiliated properties, which correlates the peer group with yourself and quietly flattens the very variance the index exists to reveal.
• Never revisiting the set. A compset assembled five years ago describes a market that no longer exists — new supply opened, positioning shifted, a competitor renovated.

The discipline, and the cost of skipping it

Review the set annually, against the market as it is now rather than as it was when somebody last thought about it. Justify each member. And be actively suspicious of a flattering index — a number that pleases everyone is a number nobody will interrogate.

The cost of getting this wrong is not an inaccurate report. It is a marketing budget spent chasing a share gap that never existed, or a complacent one that missed a real one. Both are decisions, made on a number, that the number could not support.

Terms

• Competitive Set (Compset)