Here’s How You Can Do Hotel SWOT Analysis Effectively

I was in my teens, when I heard the word SWOT analysis for the first time. And, I always used to confuse it with SWAT (Special Weapons And Tactics). 

It made me wonder, if I was a student or part of a military training camp. Eventually, my mentors guided me that both terms are miles apart from each other.

While working in the hospitality industry, I came across various opportunities and ways to do it. So today, let’s find more about SWOT analysis of hotels.

What is a SWOT analysis?

SWOT is an acronym for Strengths, Weakness, Opportunities and Threats. It’s an old-school way to assess an individual or a business at certain parameters.  

Many hotels adopt this technique before commencing their operations or when they face a critical situation. It gives an overview of all the angles that could affect their business negatively or positively.

But, being a traditional approach, hoteliers wonder if it’s necessary to perform their hotel’s SWOT analysis.

Why should you do your hotel’s SWOT analysis?

Let’s understand the importance of hotels SWOT analysis with a situation.

Say, you own a hotel amidst snowy mountains.  Initially, your property brims with guests. But soon enough, you notice a drop in the bookings. 

To recover from this loss, you deploy impromptu strategies. But none of them work.

The SWOT analysis comes into the picture here. It will give you an outlook of your hotel’s up-selling factors as well as the areas that have a scope of improvement.

How? 

First, let’s take a look and understand the hotel SWOT analysis report.

Here is a brief explanation of each point for better clarity.

Strengths of hotel: These are the key areas highlighted positively by guests. They give you an edge over your competitors. It could be location, food quality, polite staff, and such likes.

Weaknesses of hotel: Your property’s highly criticised aspects, falls under this segment. You tend to lose a majority of guests due to these points. Unclean rooms, rude staff, bad food, and slow services are some of the hotel weaknesses examples.

Opportunities of hotel: Any upcoming events, functions and holidays, which can bring you business are an opportunity. You can also consider any low-performing competitor in this vertical. 

Threats of hotel: What threatens your business? Reduced market share, well-performing competitors, hotel aggregators and so on. These are to name a few. Any factor that sweeps your guests away, is a part of this category.

Once you determine the core aspects of the SWOT, they will assist you in streamlining your focus points. You can then take corrective actions to improve your hotel’s performance.

What factors are to be considered while doing hotel SWOT analysis?

Now that you know what is SWOT analysis in hotels, it’s time to learn about the factors that will help you figure it out.

a. Revenue and forecasting report

I hope you read my previous blog on hotel reports. As stated in it, sales and forecasting reports play a vital role in the hospitality industry. 

An overview of your revenue based reports will give you a brief idea of your hotel’s performance. A gradual drop in the figures should trigger a red alert.

You can analyse the sales reports to see which department is contributing more towards the revenue.

Your priorities should be focusing on the areas where the cost incurred is more than the revenue generated.

b. Understanding market share index

Every hotel has a specific market share index. It provides them with a foresight to plan sales strategies.

In simple words, market share is all about determining your hotel’s performance with respect to your competitors. Calculating it is simple and doesn’t require working on heavy data.

All you need is the total room count of your hotel and other properties in your competitive set.

Let’s assume that your hotel has 20 rooms. You have three competitors, each with 20 rooms.

So, the total market potential would be 20*4=80 rooms per day.

Let’s say, each hotel achieved 50% occupancy every day for the entire week. So, the actual market potential would be, the sum of all the rooms sold in a week by each hotel.

In your case, it would be:

10*7 + 10*7 + 10*7 + 10*7 = 280 rooms.

Once you consolidate the data, it’s time to calculate your rightful and actual market share:

Let’s use this formula and understand your case study.

If we see, your actual and rightful market share are equal. This implies that your hotel is doing quite well in comparison to the competitors.

c. Competitor Analysis

In any business, competition is a MUST. Even in the hospitality industry, you will be the best until you have a compset (competitor set).

It’s quite simple to understand. If I were the only accommodation provider in my vicinity, it would make me rank at the top.

However, the real challenge would be when a new hotel opens in the same locality. The market share will split into two. 

It will be a tough competition. Guests will choose a hotel providing a better quality of services.

Similarly, during hotel SWOT analysis, it’s crucial to determine your compset. It will guide you in gauging your potential threats. 

Eventually, you can redefine your marketing strategies and work on your weaknesses to stay ahead of the game. 

So you can see, competitor analysis is quite an important step here.

d. Hotel reviews

Reviews are a pivotal factor during SWOT analysis of hotels. They provide a 360-degree view of any property’s best and worst features. 

Most of the OTAs and reviewing websites have keyword-based searches. If guests click on a specific word in the reviews tab, it shows them all the feedbacks related to it. 

It’s the best tool for hotels to analyse their most praised and criticised points by the guests. It helps them in understanding the property from the guests’ perspective.

How to prepare a hotel SWOT analysis report?

So, with all the mise-en-scène and mise-en-place ready, it’s time to create the hotel SWOT analysis report.

Although there are various ways to do it, I would suggest going with the quadrant method. Why?

1. It’s easy to understand
2. All the aspects are available on a single platform

It’s similar to using a graph in mathematics. Once you have created quadrants, start listing strengths and weaknesses of the hotel.

As I said earlier, use reviews to accomplish this task. You can opt for a reputation management tool. It will share a comprehensive report of positive and negative points from all the booking websites you are listed. 

After listing these points, check for upcoming social events in your city. Don’t forget to consider any carnivals, feasts, holidays or corporate conferences.

I would recommend exploring new market segments such as solo travellers, corporate guests and staycation as well.

This leads us to the last part of the SWOT analysis for hotel – Threats. As I said, disregarding your competitors is a grave mistake. 

I would suggest considering their reviews, market share, ADR, ARR and other verticals while mentioning threats. It will give you an accurate position of where your hotel stands in comparison to your competitors.

With all the relevant updates done, it’s time for you to use this report and make the necessary changes to be your guests’ best choice.