Price to Your Competitors and Your Result Will Never Exceed Theirs

When I was in high school, I was a cross-country runner. I loved long-distance running, the solitude of running through the woods, the ongoing ability to compare your results against previous runs, and the competitive nature of it all.

As I reflect on the role of competitors, I often think back to my cross-country coach who told me, “Don’t focus on the guy you’re racing; focus on beating your prior run times.”

That advice has stuck with me, and today, it inspires a fresh look at a timeless question in hotel yield management: What role should my comp set play in setting my rates?

My cross-country coach encouraged me to focus on my time for several reasons. The most important for today’s conversation is this: I was a pretty good runner, and even if I finished in a great place for my race, it may not have represented my best work. That’s why I always competed against the time that made sense for me—not the time the guy running next to me could manage.

Hotel yield is remarkably similar.When we use competitor rates in our pricing models, we limit our results to competitors' actions. But what if we’re better than our competitors?

That’s why the best yield systems prioritize your history and current performance over your comp set’s actions. At Luxe Pricing, we use Position and Velocity to inform pricing decisions, focusing on your trajectory rather than reacting to competitors.

We believe the world’s best resorts don’t follow demand—they create it.

Creating Demand Through Guest Experiences and Smart Demand Based Pricing.

Resorts have many ways to create demand, but let’s start with one of the most impactful: Guest Experience.

There's no clearer connection between a resorts' market pricing position and its track record of providing exceptional guest experiences. 

The best resorts don’t just aim to deliver great experiences—they consistently exceed expectations, as reflected in glowing online reviews. While providing an exceptional guest experience isn’t only about profit, one unquestionable benefit is the pricing power it creates.

When you base your rates exclusively on your competitor set, you miss the opportunity to capitalize on the premium pricing your exceptional reviews and experiences have achieved.Guests are willing to pay more for excellence, and the only way to understand what’s possible is by testing rates above the market standard.

Even if you’re not running a top-tier property, there are instances when your hotel should lead the market in pricing. Competitive sets are often based on the class of service and amenities, but micro-market demand factors can create opportunities to push rates above the competition.

Take, for example, a mid-market hotel located just around the corner from a full-service resort hosting a large company Christmas party on Saturday. Guests who plan to appreciate the festivities may seek accommodations nearby but may not want the higher price or destination fees.

In this case, the competitive set for our mid-market hotel is likely spread across the market, rather than concentrated in that two-block radius. If rates were based exclusively on competitor pricing, the hotel might undervalue the surge in demand created by the event. However, this change in demand becomes immediately clear when analyzing historical performance trends.

This is why the best yield systems and strategies rely on historical performance as their primary guide for setting rates—not just on what competitors are doing.

This is not to say that competitive sets carry no value for revenue managers. A look back over past results, understanding how you are performing against the market can be an excellent indicator of your market position and a practical way for owners to assess asset performance. To clarify, my skepticism toward competitive sets is specific to their use in forward-looking pricing decisions—it’s not a wholesale dismissal of their relevance.

There is a time and place to understand your position in the market; we believe that place is in understanding context and not setting rates. 

Be bold. Be a market leader. Trust in the strength of your brand, the charm of your location, and the loyalty of your guests. You’ll never realize your true pricing potential until you cease relying on competitors to calibrate and drive your pricing decisions.