What is a common practice in the hotel industry for defining competitive sets?

Using qualitative and quantitative features to define competitive sets in the hotel industry is a common practice because it provides a comprehensive understanding of the marketplace. Qualitative features may include aspects such as the type of service offered (e.g., luxury versus budget), brand reputation, and customer experience, which help create a more nuanced view of competition. Quantitative features might involve metrics such as average daily rate (ADR), occupancy rates, and revenue per available room (RevPAR), all of which are crucial for understanding performance relative to competitors.

This dual perspective ensures that a hotel is comparing itself appropriately to its real competitors, taking into account both the characteristics that influence guest choice and the statistical performance data that reflect how well properties are doing in the market. By relying solely on one aspect, such as proximity to the subject property, or using exclusionary criteria like excluding large chain hotels, a hotel might overlook key competitors that could significantly influence its market positioning and strategy. Therefore, a more rounded approach that incorporates both qualitative and quantitative factors is essential for effective competitive set analysis.