Brand experts have always been able to form opinions like these, but now there is a systematic, data-driven model that classifies hotels consistently.
Chicago, IL (PRWEB) March 29, 2012
In the latest in a series of publications on Hotel Classification, Hotel Compete today published the results of a study that re-defines Hotel Classification for hotel performance analysis. Building on an earlier article that explained how the lodging industry’s Chain Scale categories are not specific enough for hotel performance analysis, the results of this study provide a new approach for the industry.
To understand performance, analysts must know how specific hotel products are positioned against their direct (i.e. street corner) competitors. The industry’s habit of grouping broad swathes of hotel types into single categories like “upscale” is unhelpful for this purpose.
The problem with this classification – and more broadly, chain scale– is that it attempts to blend two types of scale: “Nominal” – i.e. where hotels are placed into categories, based on their attributes; and “Ordinal” – i.e. where categories form a rank order. This is problematic: With today’s brand proliferation it makes no sense to assume, for example, that “upscale” products are better than “limited service”. In many cases they aren’t.
When people search for hotels they are not looking for chain scales. Most industry research identifies price, location, guest review ratings and product attributes as the dominant criteria affecting hotel booking decisions. If these things are relevant to bookers, they should drive the way that we categorize hotels in performance analysis.
Hotels go to great lengths to differentiate themselves from their competitors. Hotel Compete knows this better than anybody, through monitoring week-over-week changes to amenities, services and descriptions across the entire hotel market. Loyal guests usually know what to expect of brands and sub-brands each time they plan a stay. As a result, independent hotels or smaller brands – boutique hotels in particular – put even greater effort into product differentiation.
In this environment, it makes sense to class hotels based their product attributes. If a guest is looking for a hotel that offers certain services, amenities, etc., they are most likely comparing a set of alternative hotels that are substitutable, and hence similar. Hotel Compete used its detailed property data to identify optimal hotel categories, which can be seen in the table. Each hotel is categorized using a composite of “Hotel Class” (of which there are seven) plus a “Category” (which describes the type of hotel within the class) and the “Level” (which describes relative quality).
This approach (a more detailed explanation of which can be found on the Hotel Compete website) has two important advantages over chain scale. First, it fixes the problem of differentiating hotels based on quality (level) without forcing the entire class structure into a rank scale. Secondly, because this model is driven by actual hotel data rather than overall brand vision, it enables us to allocate each hotel to the most appropriate classification.
This is an important distinction for hotel brands and analysts. It means – for example – that they can replace classifications like “Brand X is an upscale brand”, with “Brand X consists mainly of large full service properties of with X% medium and Y% high quality”. Brand experts have always been able to form opinions on matters like these, but now there is a systematic, data-driven model that categorizes individual hotels in a 100% consistent manner.
This uniquely detailed analysis has provided a robust new way of classifying hotels. It lays the foundations for better hotel business intelligence. Better hotel classification leads to more relevant characterization of hotel products and markets.
Hotel Compete’s Hotel Classification methodology will feature in some further upcoming research. Topics will include: Hotel Comp Set Analysis, analysis of some specific hotel brands, and current industry hot topic, Guest Review Ratings. Details will be posted in the coming weeks on http://www.hotelcompete.com.