Compset — who our competitors are

In lesson 12 (A day in the life of an RM) we saw that Daniel opens the compset watch daily at 8:30 — the rate movements of the 4 main competitors. That routine led to a classic event-discovery moment: the Coldplay concert showed a -EUR 35 rate gap, and the hotel reacted.

But where did these “4 main competitors” come from? How did Daniel choose them? And did he definitely choose the right 4?

This lesson is about the definition of the compset — choosing, calibrating the competitive set, and why you can make dramatically poor decisions based on a badly chosen compset.

What the compset is

The compset (competitive set) is a set of 5-10 hotels against which we compare our own hotel on rate, occupancy and market position. These hotels are competitors in the sense that the guest can choose between us — any of them can be part of the same booking decision.

The compset is not “all the 4-star hotels in town”. An urban 4-star and a seaside-resort 4-star compete in two completely different markets — even though in an STR report they’re in the same “4-star hotel” category.

The compset is a subjective choice the hotel makes for a specific purpose: “which hotels does my typical guest choose between?”

Why a good compset matters

A bad compset generates bad decisions. A few classic mistakes:

Mistake 1: Too-easy compset

If Hotel Peaqplus City’s compset consists only of 3-star hotels (because “they’re the closest to us”), then:

• Our own EUR 110 BAR is +EUR 25 higher than their average (≈EUR 85) → a “we’re mispricing” feeling.
• Reflex: cut the rate to EUR 95 → a loss of EUR 15 / room / night.
• But we don’t actually compete with these — our typical guest looks at hotels in the 4-5-star category.

Mistake 2: Too-hard compset

If the compset contains only 5-star and luxury hotels, then:

• Our own EUR 110 BAR is EUR 80 below their average (≈EUR 190) → a “we’re mispricing, too cheap” feeling.
• Reflex: price up to EUR 180 → dramatically falling pickup, empty rooms.
• But the guest who’s willing to pay EUR 180 goes to the luxury hotels anyway — we fall below their base, but above our own segment.

Mistake 3: “Geographic” compset

The “500-metre radius around us” compset is a logical trap. Two hotels 100 metres apart can be completely different segments — a boutique design hotel and a budget chain sit side by side in the city centre, but serve different guest classes. From the guest-choice standpoint they don’t compete.

A good compset is guest-choice-based, not geographic.

The 4 criteria for choosing a compset

A good compset is built on four complementary criteria:

1. Location — relative, not absolute

Not “next to the hotel,” but “a location serving the same purpose”. Hotel Peaqplus City is in the city centre, a 7-minute walk from the main square. Its compset members are also city-centre-level hotels — not necessarily within 100 metres, but the same “city centre business + leisure” position. There can be one among them 1.5 km away, but strategically the same location.

2. Category and quality

4-star with 4-star, 5-star with 5-star — or: upscale with upscale, midscale with midscale. The star rating is a starting point, but the actual market position (renovation status, quality level, brand strength) often refines it.

3. Target audience and segment mix

Two 4-star hotels can serve a completely different segment mix:

• One with an 80% business + 20% leisure mix (corporate-oriented).
• Another with a 20% business + 80% leisure mix (tourist-oriented).

These are different market competitors. When choosing a compset, we look for ones similar to our own segment mix.

4. Price range

Their BARs must overlap with ours. If Hotel Peaqplus City’s average BAR is EUR 110 (in a 90-145 band), the compset hotels’ average BAR should also be in the 95-130 band. Not ±50% — because then we’re in a different segment.

We apply the 4 criteria together. A hotel that passes 3 criteria but fails the 4th (e.g. same location, category, price range, but a completely different target audience) is not a good compset member.

The three-tier compset model

Modern RM practice uses not one compset but three:

Primary compset (3-4 hotels)

The closest competitors — those we compete with directly for the bookings. We compare with these daily, and react fastest to their rate movements.

Secondary compset (3-5 hotels)

The secondary competitors — those we sometimes compete with (e.g. when the primary compset is full, or we’re full and the guest looks further). We compare with these weekly / monthly.

Aspirational compset (2-3 hotels)

The target hotels — those who position above us in rate and quality, and who we’d like to be. We don’t compete with them directly, but observing them helps develop our own strategy: how they price packages, what their F&B strategy is, how they build the brand.

The three together give a strategic frame:

Compset tier	Frequency	What we use it for
Primary	Daily	Price revisions, event-discovery, pace comparison
Secondary	Weekly / monthly	Checking market position, watching direct competition
Aspirational	Quarterly / annual	Strategy development, brand lessons

Hotel Peaqplus City’s compset example

To make it concrete, Hotel Peaqplus City (80-room, 4-star, city-centre mixed-segment) compset architecture looks like this (the hotel names are fictional):

Primary (4 hotels)

• Hotel Aurelia — 90 rooms, 4-star, 6 streets away, mixed business/leisure. A direct competitor.
• Hotel Belveden — 70 rooms, 4-star boutique, business-strong, 1 km away. Same segment.
• Hotel Citadel — 110 rooms, 4-star, nearby, leisure-strong. Competes for the weekend guests.
• Hotel Danubea — 75 rooms, 4-star, midscale, well-rated. Competes for the price-sensitive segment.

Secondary (5 hotels)

• Hotel Esperia — 130 rooms, 4-star, slightly farther out (on the city’s edge), corporate-strong. Occasional guest overlap.
• Hotel Faroe — 95 rooms, 3-star superior, positioned below on price. Competes with the “discount seekers”.
• Hotel Glenwood — 100 rooms, 4-star, interesting design, a younger leisure segment.
• Hotel Helios — 85 rooms, 4-star, international brand. Competes for the brand-loyal guests.
• Hotel Indigo — 120 rooms, 4-star, MICE-strong, brings conference groups.

Aspirational (3 hotels)

• Hotel Janus — 110 rooms, 5-star, design, high ADR (EUR 180-260). A positioning reference.
• Hotel Kelvin — 90 rooms, 5-star boutique, premium F&B (a Michelin concept). An F&B-strategy reference.
• Hotel Lirieth — 130 rooms, 5-star chain, brand-strong. A brand-building lesson.

We compare with the primary daily. We review the secondary at the weekly revenue meeting. We analyze the aspirational at the monthly strategic meeting — “what are the Janus people doing that we could learn from too?”

Compset metrics and STR

The industry standard for compset analysis uses the terminology of STR (Smith Travel Research) — now the CoStar Group, and it’s the main benchmarking provider in most markets. It uses three main metrics:

MPI (Market Penetration Index)

MPI = own occupancy / compset average occupancy × 100

If Hotel Peaqplus City is at 82% and the compset average is 75%, then MPI = 82 / 75 × 100 = 109.3. The “100” means “we compete exactly at the compset average”. 109.3 = 9.3% better occupancy than the average. Below 90 = underperformance.

ARI (Average Rate Index)

ARI = own ADR / compset average ADR × 100

Hotel Peaqplus City EUR 108, compset average EUR 112 → ARI = 96.4. Underpricing by 3.6%. Above 100 = a higher rate position.

RGI (RevPAR Generation Index)

RGI = own RevPAR / compset average RevPAR × 100

The combination of the two (≈ MPI × ARI / 100) — it folds the occupancy and rate positions into a single metric. For Hotel Peaqplus City: 109.3 × 96.4 / 100 ≈ 105, i.e. +5% above the market average (the higher occupancy more than offsets the slightly lower rate). This is the most important market-position metric — an RGI of 100 means the hotel performs at the market average. RGI 110 = +10% above the market average, RGI 90 = -10% below it.

In lesson 44 (Compset and market positioning) we cover these index metrics more deeply — here just the concept.

The annual compset review

The compset isn’t forever. Market conditions change, and so do the compset members. It must be reviewed at least once a year, and at a major market event (a new hotel opening, a brand-position shift) immediately.

Typical review questions:

1. Are our compset members still in our segment? — A hotel that has renovated and moved up to the next category is no longer a primary competitor.
2. Has a new hotel opened in our area? — The Hotel Mona that opened 6 months ago (100 rooms, boutique, 4-star, city centre) is a strong candidate for the primary compset.
3. Has an existing compset member left the market? — Due to bankruptcy, withdrawal, a brand change.
4. Has our own position changed? — We renovated the hotel, the guest segment shifted — the compset members are no longer current.
5. Has our own segment mix changed? — More and more MICE groups are coming in, fewer transient — perhaps a MICE-strong hotel should be added.

At this year’s review, for example, Hotel Peaqplus City runs exactly this deliberation: Hotel Danubea moved up to a higher rate position after its renovation — the question is whether it is still a primary competitor. The decision: it stays, because the guest overlap remains (bookers still shop the two hotels side by side), but from now on we read its rate position as the set’s upper anchor. Hotel Mona (the new opening) goes on the watch list: if the Danubea’s upward drift proves lasting, it is the natural replacement at next year’s review. The lesson: a review is not always a swap — but it is always an explicit decision.

The limits of compset analysis

Two important cautions about the compset:

1. The compset rate is only the rate

The rate-shopper tools (RateGain, Lighthouse — formerly OTA Insight) see only the rate — they don’t see occupancy, ADR or TRevPAR. STR access fixes this gap, but it’s a paid service and gives data with a 2-3 day lag.

This means: if a compset hotel stands at a EUR 50 higher rate, we can’t be sure there are bookings there. It may be that the hotel is empty and made a mistake.

Compset watching is therefore a trend signal, not a definitive answer.

2. The compset choice can become biased

Hotel owners tend to choose their compset easier, so “we look better”. A 4-star hotel that picks a 3-star compset will always show a high RGI — but the real market position is no better for it.

The balance between the feeling of confidence and the true market mirror matters. A mature organization aligns its compset to market reality, not along its own sense of pride.

Key takeaways

• The compset is a set of 5-10 hotels we compete with directly — on a guest-choice basis, not a geographic basis.
• The 4 selection criteria: location, category/quality, target audience/segment mix, price range. We apply the four together.
• Three-tier compset: primary (daily), secondary (weekly/monthly), aspirational (quarterly/annual). Each serves a different purpose.
• STR metrics (MPI, ARI, RGI) are the quantitative measure of compset position. RGI is the most important market-position metric (≈ MPI × ARI / 100).
• The annual compset review is mandatory — because of new openings, brand-position shifts, and our own strategic changes.