What is Competitor Benchmarking Analysis and Why is it Crucial for the Travel and Tourism Industry?

A guest blog by accelerate agency

Introduction

How does your travel company’s performance stack up against your competitors? You’re not going to find out through assumptions alone—you need to perform a competitor benchmarking analysis.

From uncovering how much market share you control to whether your pricing strategy is competitive, competitor benchmarking empowers you to identify strengths and weaknesses, make targeted improvements, and become a market leader in the travel and touring industry.

Let’s discuss how to benchmark against competitors, what insights you can glean, and some potential challenges to be aware of.

What is competitor benchmarking analysis?

Competitor benchmarking analysis is the process of using metrics to compare your company’s performance to the performance of companies in the same niche. It involves deep-diving into your competitor’s business strategies and models to measure things like service quality, revenue growth, pricing strategies, and marketing effectiveness.

For a start-up entrepreneur, engaging in this form of analysis is vital. It helps to strategically position your emerging business within the travel and tourism industry by identifying where you can uniquely appeal to your target audience.

In doing so, you can better understand your market position and evaluate how your products and services compare to competitors. 

So, how do you calculate industry benchmarks?

Metrics to look at for benchmarking analysis

Here are some key metrics you should consider for your competitive benchmarking analysis, along with some handy calculations.

Market share to assess your position

Market share describes the proportion of the market a company controls. 

You can calculate it by dividing the percentage of a company’s annual total revenue/sales by industry-wide revenue/sales. 

Research market share data to determine how much of the market you control compared to your competitors. Who is the market leader? Who’s gaining market share, and who’s losing it? And, most importantly, why?

Adding to these financial insights, valuing a business based on its revenue offers a direct look at its financial scale and effectiveness in capitalizing on market opportunities, which is crucial for thorough competitive comparisons.

Revenue growth to compare financial and market performance 

Revenue growth rate provides valuable insights into the growth trajectory of your competitors and how your business is expanding comparably. 

You can calculate revenue growth by subtracting the previous period’s revenue from the current period’s revenue. From there, divide the results from the previous period’s revenue, multiply by 100, and you have your revenue growth rate. 

Customer satisfaction scores

Customer satisfaction (CSAT) scores tell you how satisfied customers are with a company’s product or service. High CSAT scores indicate that you’re meeting customer needs, while low CSAT scores suggest issues in your customer experience. 

Ask customers to complete customer feedback surveys. From there, divide the total number of “very satisfied” or “satisfied” customers by the total number of responses and multiply by 100. 

Once you’ve determined your CSAT percentage, use industry surveys and reports to find and compare the scores of your competitors.

Product quality metrics to gauge competitive offerings

How good are your tours, activities, and products in comparison to your direct competitors? Do they offer things you don’t or score higher for things like tour guide knowledge or organisation?

CSAT surveys, online reviews, testimonials, ratings, and other sources can give you a range of metrics that you can use to analyse product or service quality.

Pricing strategies to understand market pricing positioning

Look at the websites of companies in your industry to assess how their prices compare to yours. From there, you can identify minimum, maximum, and average prices to determine the market pricing positioning of each company and adapt your tour pricing strategy.

Additionally, this analysis aids in establishing competitive pricing, ensuring your offerings are attractively priced relative to your competitors.

Operational efficiency ratios to analyse cost management

Operating efficiency ratios compare total operating expenses to net sales to evaluate how cost-efficiently and productively a company uses its resources. 

Marketing effectiveness metrics

There are a range of metrics that measure the effectiveness of your (and your competitor’s) marketing campaigns and strategies. Many industry-specific marketing benchmarks are available online.

They include:

• Website traffic
• Conversion rates
• Cost per lead
• Leads generated
• Social media followers
• Social media engagement
• Customer acquisition cost (CAC)
• Marketing ROI

Why is competitor benchmarking crucial for the travel industry?

In the saturated travel and tourism market, gaining a competitive edge is critical to success. Here’s why you should perform competitor benchmarking analysis.

Improves market positioning to better position travel services

By understanding the market position of similar companies, you can carve a space for yourself in the market that isn’t oversaturated or dominated by market leaders. 

For example, let’s say your main competitors are targeting luxury travelers, focusing on high-end experiences in hot-spot destinations. By emphasising your off-the-beaten-track experiences, you can differentiate from the competition and establish a place in the market.

This would work to your advantage, too. Travelers want to “explore like a local” more than any other activity, with 53% of them eager for off-the-beaten-track walking tours.

This differentiation starts right from the beginning, including the important step of choosing a business name that reflects your unique offerings and appeals to your target demographic.

Image sourced from Americanexpress.com

Enhances customer satisfaction resulting in repeat clients

The more satisfied your clients are, the more likely they are to return. Using competitor benchmarking analysis, you can assess whether your company meets, exceeds, or falls short of expectations. From there, you can use the strategies of high-performing competitors to inform your own.

Helps identify best practices to increase operational efficiency

Competitor benchmarking unveils who the top-performing companies in your industry are for efficiency and, crucially, what operational practices they’re using. 

Using this knowledge, you can adjust your own operational strategies and processes to increase efficiency, such as adopting a new tech.

Uncovers opportunities that drive innovation 

Rich with real-world insights, competitor benchmarking analysis introduces you to the concepts, strategies, and practices of high-performers. 

Maybe your competitors are attracting business clients using clever B2B SEO strategies. Maybe they’ve recently adopted a new automation technology that’s streamlining their booking experience for customers. With insight into competitor’s strategies, you can adapt and refine their techniques to suit your unique environment, unlocking improvement and innovation.

Boosts marketing effectiveness with data-driven insights

Keeping up with industry marketing trends and best practices is key to consistently attracting, nurturing, and converting customers. With data-driven insights into competitor marketing successes and failures, you can continuously adapt your strategies to effectively market your tour business.

Optimises service pricing aligned with industry benchmarks

A data-informed pricing strategy ensures that your company’s services provide value while being competitive and profitable.

Competitor benchmarking analysis unmasks the pricing dynamics of companies that offer similar services. This can help you balance cost, value, and competitive positioning to optimise service prices.

Potential challenges in performing competitor benchmarking

While the benefits of competitor benchmarking analysis are lucrative, there are a few challenges and obstacles that you should take note of.

Differences in travel business models complicate comparisons

For comparisons to be valuable, the business model of the competitor company needs to be similar to your own. The more dissimilar your business models are, the more complicated comparisons become.

For example, let’s say you’re a local, brick-and-mortar travel company aiming to provide bespoke experiences to budget-conscious travelers, focusing on personalization. Your competition—an online travel company—might be serving the same market, but using a business model that concentrates on generating high volumes of one-time bookings. 

This makes comparing metrics like customer acquisition costs, pricing strategies, and service quality complicated, as the benchmarks are going to vary. If you’re not careful, this can invalidate your analysis.

Varying data collection methods and reporting standards

The digital era has put vast volumes of data at our fingertips—but the relevancy and authenticity of this data can be questionable. 

Firstly, there’s no guarantee that your competitors have released first-party data. This means that you have to collect it from open sources, some of whom may be unreliable.

Secondly, even if your competitors have shared data, you need to put your trust in their data collection methods and reporting standards. 

Has their data been cleaned and standardised to reduce errors? Do their released reports reflect reality? Are their regional regulations different from yours? This variance in data collection and reporting can make accurate, consistent benchmarking analysis complicated.

Difficulty in quantifying subjective and intangible factors

A company with a team of highly experienced and knowledgeable tour operators will have a competitive advantage. But exactly how do you quantify this?

Quantifying subjective and intangible factors like employee skills and qualities, brand reputation, and customer relationships is challenging. But, with such a significant influence over financial performance, they’re crucial to understanding success and establishing reliable benchmarks. Without a solid method for quantifying these metrics, you risk overlooking key factors that drive competitor growth, sustainability, and revenue.

Identifying competitors with overlapping services and target markets

Many companies target multiple markets and provide overlapping services. By identifying these companies as competition, you can broaden your analysis, detect threats, illuminate opportunities, and accurately gauge benchmarks.

For example, imagine you’re a luxury travel provider specialising in high-end, exclusive, nature-drenched experiences. Your competition might very well be a wellness travel provider whose services also include experiences focused on exclusivity, relaxation, and rejuvenation. 

Identifying indirect competitors can be challenging. It requires you to dive deep into the full range of a company’s services, truly understanding their value proposition in relation to your target markets. One way to overcome this is to borrow elements of an SaaS SEO strategy to uncover companies targeting the same keywords as you.

Keeping up with new technologies and travel industry channels

Technology in the travel industry is advancing at speed. From virtual reality to AI-driven dynamic pricing and automated online booking systems, companies are adopting advanced tech and new channels at scale.

For example, you can boost your revenue and increase your efficiency by using all-in-one booking software to improve resources management and drive online bookings. Alternatively, solutions such as the Redzy Channel Manager will help you to go beyond direct bookings, manage your partnerships and gain access to a vast distribution network.

Keeping up with all these technologies and channels is a critical consideration in competitive analysis. To make accurate comparisons, you need to understand how competitors use these technologies to enhance experiences, streamline workflows, expand their reach, and drive revenue. 

That said, continuously adapting your benchmarking strategy to consider these changes requires considerable time, effort, and expertise.

Conclusion

Despite the challenges, competitor benchmarking analysis is a vital and beneficial initiative, especially for travel companies. By using reporting and analytics tools, you gain actionable insights that will allow you to accurately measure your performance against your main competitors, giving you an edge.

So, why not get started?

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