5 Signs You Need a Hotel Market Study

Market studies · 5-minute read · JJ Díaz de Sandi & Asociados

Most hotel projects that fail don't fail because of poor operation: they fail because of decisions made without data —a bad location, the wrong size or a rate the market was never going to pay. The good news is there are almost always warning signs before signing. If you identify with any of these five, it's time for a hotel market study.

1. You're about to buy land or a property "because it's cheap or well located"

A location that looks perfect to you may not match the destination's real demand. Before committing capital to land —usually the most expensive part— you must confirm that the guest who will fill your hotel exists there.

2. A brand offers you a franchise (or Key Money) and you only have their projection

Chains are excellent at selling their brand, but the projection they hand you is their view. You need an independent second opinion that validates the rate and occupancy they promise. Also read: Key Money: what it is and how it benefits your investment.

3. You don't know your expected rate or occupancy, nor your competitive set

If you don't know who you compete against or at what price, you're investing blind. A study defines your competitive set and projects realistic occupancy, ADR and RevPAR. (We explain those metrics here: What is RevPAR and ADR.)

4. Your hotel already operates, fills up well… but isn't profitable

High occupancy doesn't always mean good business. If you fill rooms but the result doesn't come, you may be underpricing the product or competing in the wrong market. More on this: Measuring tourism and its economic impact.

5. You're going to seek financing or partners

No serious bank or investor puts money in without a study backing the numbers. A professional study is your best card to secure capital on better terms.

What does a market study answer?

• The destination's real demand and the guest profile.
• The competition and your position against it.
• The occupancy and rate projection (ADR/RevPAR).
• The required investment and expected return (ROI).
• The optimal concept, size and brand for the project.

How much can it save you?

A poorly located, over-invested or mis-sized hotel costs millions and years of operating losses. Against that, a market study is a tiny fraction of the investment that turns a bet into an informed decision. It is, literally, your project's cheapest insurance.

Why do it with us

At JJ Díaz de Sandi & Asociados we have completed more than 160 market studies across more than 300 cities in Mexico, now powered by our own Artificial Intelligence. We don't tell you what you want to hear; we tell you what you need to know.