Faculty & Research
Product Tiers and ADR Clusters: Integrating Two Methods for Determining Hotel Competitive Sets
Vol 9 No 14
By: Jin-Young Kim and Linda Canina Ph.D.
Executive Summary:
Despite the importance of accurately identifying a hotel’s competitors, determining those competitors is not a simple task. A common and easily implemented approach is to categorize products in terms of product type, but competition may occur across different types of products depending on how consumers perceive goods as substitutes. As an alternative, we identify the competitive set using cluster analysis based on hotels’ average daily rate (ADR). A cluster analysis of the ADR of 49 hotels in one urban tract in the U.S. found five competitive clusters, in which upscale properties were in some cases competing directly with economy hotels. This analysis indicates that some properties have a discrepancy between their intended product type and their perceived competitive position, based on ADR. By integrating and comparing the results of the two methods for the purpose of performance evaluation, managers, owners, analysts, and investors can ascertain the market position of a hotel as determined by its guests, and make inferences regarding the hotel’s value proposition, property condition, service offerings, and management acumen. In particular, the analysis points out performance benchmarks for hotels that are underperforming their competitive set and those that are outperforming their competitors.
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- Product Tiers and ADR Clusters: Integrating Two Methods for Determining Hotel Competitive Sets By: Jin-Young Kim and Linda Canina Ph.D.
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Other Reports or Articles You May Find of Interest
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- Pricing for Revenue Enhancement in Asian and Pacific Region Hotels:A Study of Relative Pricing Strategies, by Linda Canina and Cathy A. Enz
About Linda Canina Ph.D.
Linda Canina is an associate professor in the School of Hotel Administration's Finance, Accounting, and Real Estate department. There, she teaches undergraduate and graduate courses in corporate finance. Canina also serves as editor of the Cornell Hospitality Quarterly. Her research interests include asset valuation, corporate finance and strategic management. She has expertise in the areas of econometrics, valuation, IPO's, payout policy, mergers and acquisitions, options and the hospitality industry. Canina's current research focuses on strategic decisions and performance, the relationship between purchased resources, human capital and their contributions to performance, the relationship between various liquidity measures and profitability, and measuring the adverse selection component of the bid/ask spread. Her recent publications include: "Agglomeration Effects and Strategic Orientations: Evidence from the U.S. Lodging Industry" in the Academy of Management Journal. Canina's other work has appeared in the Journal of Finance, Review of Financial Studies, Financial Management Journal, the Journal of Hospitality and Tourism Research, and the Cornell Hotel and Restaurant Administration Quarterly. She holds a Ph.D. degree from New York University.
For more information visit http://www.hotelschool.cornell.edu/research/facultybios/faculty.html?id=10
