Why the Worst Revenue Managers Love their Comp Set

I love data served with math because it allows you to see patterns that you could never see otherwise.   However, there are some instances where correlations are so obvious that I can quickly draw universal conclusions just from casually observing some samples.  I have worked with dozens of Revenue Managers from many different types of properties and over the years one pattern has been consistently confirmed. That is that the least sophisticated RMs rely heavily on their comp set information.   Now, I am not saying that your competitor’s price movements are not important. They are an invaluable piece of the RM analysis puzzle, but only when used in moderation.   Your comp set should be treated like the barriers on the side of the highway:  they are a great signal of limits, but if you stare at them too long you lose control of your steering and you will probably crash.  In my experience, there are many, typically bad, reasons why an RM is a heavy comp set user. Here are the top 5.

5. They think in a vacuum.

It will take you about 10 minutes to teach anybody to set rates for a property using only comp rates, even if that person has never worked in a hotel.  That’s because most comp set analysis is myopic and one-dimensional – just follow the pack.  Where RM analysis gets complicated is when you have to sit at the intersection of different, and often competing,  interests (i.e. Marketing, Sales, Operations, Ownership) and then craft a set of tactics that optimizes the results for all parties.  The worst RMs do exactly the opposite. They make decisions using only one perspective and that is why, outside of the comp set, they really have no other issues to consider.

4. They don’t have a long term plan.

When you don’t or can’t plan, then you allow the market to do with you as it wills.  You are like a piece of wood in the ocean.  When you function without a clear set of long-term revenue objectives, the comp set serves as the best decision tool because you can always blame all failures on the market.  I have met several RMs that believe that long-term planning is useless because you can never really know what the comp set will do next.  What they are in fact saying is that the comp set (i.e. price movements and inventory coming online) determines their hotel’s success. If that is true, why do their hotels even need a Revenue Manager?

3. They don’t have a revenue strategy.

RMs that cling to comp set analysis are usually weak in the RM strategy department. They don’t really know how to take the multi-dimensional issues involved in RM and make sense out of it.  Revenue Management strategy is not a simple topic and when RMs do not have enough bandwidth to handle the complexities of their role they simplify the problem by looking at only one dimension – the comp set.

2. They don’t understand their guests.

Truly understanding the set of unique demand patterns that affects your property takes effort and time.  You must have the desire and curiosity to become an expert in the predictability of your guests behavior when it comes to booking  and spending. Those RMs that are not domain experts in their property’s demand patterns are also the ones that typically rely on their competitor’s price movements as the lighthouse beacon by which they navigate their rate strategy.

1. They don’t know how to analyze data.

This is the single biggest issue.  Everyone is well aware of the fact that analytical talent is scarce across every industry and that the hospitality industry has and will be specially affected by this trend.  Every time I meet an RM that is heavily focused on the comp set I always find that they are doing almost no other type of analysis.  They typically lack the ability to access and analyze their hotel’s data.  Even when they do have an RMS system they are not proficient at reading charts or finding insights in tables.  It is no wonder that they use the comp set as an easy way to approach a very complex problem.

Conversely, the best RMs that I have met do tons of analysis on their hotel’s unique demand patterns and profitability flows.  This is why their properties are typically the most financially successful in their markets.

About Robert Hermandez

Robert Hernandez is an expert in the field of Mathematical Optimization and Data Analytics for revenue growth and business process improvement. He has spent the last 17 years building data-driven forecasting and optimization models for companies in over 20 different industries, from tech to tourism. Robert possesses a very unique skill set including cross-disciplinary experience, advanced mathematical

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