Which hotels should you price against? The competitive set and where you sit in it

By Jason Wu — General Manager of a family-run group of independent hotels · Chapter 2 of the independent hotel pricing guide · Updated August 2026

Price against a competitive set: about ten hotels your guests weigh against yours. Most sit at your standard; a couple a step above and below mark the edges. Build the set by hand from OTA search results. Then read your position from review scores: the score gap decides the price gap your rate can carry.

Before you start: no other chapter is required: the set is where the method begins. Chapter 1 defines the numbers (occupancy, ADR, RevPAR) used to judge the results. Landed here first? The guide overview shows where this chapter fits.

A guest choosing a room in your area never sees your hotel alone. They see a search screen: your property and the others beside it, each with a price and a review score. That comparison decides what your rate can be. Pricing from your costs, or from last year's list, ignores the one thing the guest is looking at.

This chapter builds what the rest of the guide reads daily: your competitive set, the hotels whose prices define your market. It then shows how to read your position inside the set, so your rates rest on evidence instead of instinct.

What makes a hotel a comparable?

A comparable is a hotel your guests genuinely weigh against yours. Not every hotel nearby qualifies, and not every comparable is obvious. Three tests decide, in order:

• Same area — the area a guest treats as one place, which is often wider than your district. A guest booking Kuala Lumpur may weigh Bukit Bintang against KL Sentral; few weigh it against Petaling Jaya.
• Same standard — a guest who would book them would book you: similar room quality, facilities, and service level. Review scores may differ; the score decides your position (below), not who belongs.
• Same price band — mostly within the range a guest shopping near your rate would still consider.

What a guest treats as one place depends on the guest. A guest visiting one company's office stays near that office. A first-time leisure visitor compares across the city's central districts, because a short train ride does not change their plans. Watch how your own guests search, and match the area they use.

Ownership and label do not matter. A branded hotel, a serviced apartment, or a large guesthouse belongs in the set when guests weigh it against you. The test is what the guest's screen shows, not the building's category.

Why this works. Rooms a guest treats as interchangeable are priced against each other, whether you participate or not. Economists call such products substitutes: when one changes its price, demand shifts among the rest. Your set is simply the list of your closest substitutes, written down. (Full treatment: the economics series.)

How many hotels belong in the set?

Build toward ten. Most of the set sits at your standard and price band: the hotels a guest considers beside yours. Then add the edges: a few properties a step above and a step below. The edge hotels are reference points, not rivals to match. The hotels above show where your guests upgrade when your price climbs too far. The hotels below show what undercuts you when demand is weak. When demand moves between bands, the edges often show it first: the hotel above sells out, the hotel below raises its price. Chapter 6 reads those signals.

Author’s working rule around ten comes from practice, not research: large enough to read the market, small enough to check daily (Chapter 5).

The count adjusts in one direction only. If your stretch of city or coast holds only six real comparables, six is your set. Do not pad it. A hotel added only to reach ten produces readings that mean nothing, and you will price against them anyway.

How do you build the set from OTA search results?

No benchmarking subscription, agency report, or consultant is required. One OTA and about an hour build the set by hand.

1. Open one OTA. Use a logged-out or private window, so member pricing does not distort what you see.
2. Search your area for a normal weekend two to three weeks out: two adults, one night.
3. List every property a guest shopping near your rate would consider. Apply the three tests to each.
4. Note each survivor's price and review score beside its name.
5. Keep the hotels at your standard, aiming for six to eight. Add one or two above and below as the edges, toward a set of about ten.
6. Repeat the check on one strong date, such as a school-holiday Saturday. Remove any hotel priced far outside the band on both dates.
7. Save the final list as favourites. Copy it onto the sheet the deep pass writes (Chapter 5).

Revisit the set twice a year, and whenever the hotels around you change. A new hotel opens, a comparable renovates, or one repositions its prices permanently. Between revisits, keep the set fixed, so weekly readings stay comparable.

Where do you sit in the set?

The set answers who you are priced against. Position answers where inside it your rate belongs. Position is quality-adjusted, not just priced, and on the guest's screen quality has a number: the review score.

Cornell research measured how review scores convert into pricing power (Anderson, 2012). One extra review point on a five-point scale supports a premium of about 11.2% that guests will still accept. The same study put one point of the 0–100 Global Review Index at about 0.89% of ADR. That effect is per point of the index, not per percent. Two cautions apply to these numbers. The sample was mid-range and upscale Western hotels, so treat the sizes as directional for a Malaysian independent; the direction itself is well established. And the scales differ: Booking.com and Agoda score out of ten, so a one-point gap there is smaller than the study's five-point-scale point. Do not apply 11% to it directly.

The research justifies a reading, not a formula. The set below is illustrative: a city set, scores out of ten, one Saturday's prices.

Rank the set twice: once by score, once by price. Here, your hotel ranks third by score and sixth by price. Three hotels scoring below yours (C, D, and E) price above you. That is underpricing: guests pay your neighbours a quality premium you are not collecting. The correction is not RM230 to RM290 in one move. Chapter 3 resets the base; Chapter 5 watches the set's response, date by date.

The same reading finds the opposite case. Consider a hotel outside this table: scored 7.6, priced at RM265. It would sit above three better-scored neighbours. Guests run the comparison, and that hotel sits empty on every soft date. Run the two rankings on your own set today; they take five minutes. Where your two ranks disagree by more than a place or two, that is this chapter's first decision.

One honest caution: a review score compresses quality into one number, and it misses things. A rooftop view, a full renovation the reviews do not yet reflect, a location advantage of two hundred metres. Treat the ranking as the first reading, not the verdict. And position is not fixed: a better score supports a higher rate, so managing your reviews directly affects what you can charge.

What if your market is not a city?

The three tests do not change outside the city; the geography does. A resort guest chooses a destination first and a property second. So the area a guest treats as one place widens, from a city block to a beach stretch, a district, or an island. Comparables get fewer, and the ring gets wider.

In a thin market, make sure a short count is real before accepting it. No new rules are needed: the same three tests reach further, because the guest's area is bigger. The area test widens to the whole destination: guests who chose your coast compare hotels across all of it. A resort far along the same coastline is a true comparable; a town hotel ten minutes inland usually is not. The standard test loosens at the edges. With less choice, guests compare across a wider quality band, so the above and below references can sit a step further out. Property type follows the same logic. A villa, a homestay, or a serviced apartment can pass all three tests, and at a beach destination they often do.

The stop rule is also unchanged. A core hotel must be one your guests weigh against yours today. An edge hotel must be one they would move to if prices changed. If the tests still leave you with six, six is your set. A wider ring changes Chapter 5's daily read: the same routine, across more kilometres.

What does the set do after today?

Built once, the set works daily. Chapter 5's Market Check reads it on two rhythms. The daily glance covers the whole set across the next 14 days, and every watch-list date beyond them. The weekly deep pass covers the weekends and marked far dates, written on the sheet. Chapter 6 turns what the reading finds into moves: a price crossing yours, several hotels moving the same date, comparables selling out. That last one is compression, the strongest raise signal the set produces. Position work returns at the twice-yearly revisit. The rest of the guide does the daily reading; this chapter decides what gets read.

Do this today

1. Open one OTA. Search your area for a Saturday two weeks out.
2. Write down every hotel a guest shopping near your rate would consider. Apply the three tests.
3. Rank your list twice: by review score, then by price. Mark where your hotel's two ranks disagree.

Frequently asked questions

Should the cheapest hotel in the area be in the set? Only if guests shopping near your rate genuinely consider it, or as the below-edge reference. A budget property your guests never compare makes every reading less reliable.

Is a chain hotel a valid comparable? Yes. Guests compare rooms and scores, not ownership; a branded hotel that passes the three tests belongs in the set.

My area has only four or five real comparables. Does the method still work? Yes: build the set at that count and do not pad it. Fewer hotels means each signal is easier to read, not harder.

Should the set change when a competitor changes its prices? No. Price moves are what the set exists to show you (Chapters 5 and 6), not a reason to rebuild it. Rebuild only at the twice-yearly revisit, or when the hotels around you change.

Sources: Cornell Center for Hospitality Research, Anderson 2012 (review scores and pricing power: about 11.2% price headroom per point on a five-point scale; about +0.89% ADR per point of the 0–100 Global Review Index; mid-range and upscale Western sample). Set size and set shape (the edges): the author's practice; the revisit cadence is a starting point to tune. Internal: Chapters 1, 3, 5, 6.