When you want to know details about your business and how to best spend things like marketing dollars, upgrades, and employee salaries; a market analysis is the perfect solution to give you the insight needed for success.
What is a Market Analysis?
By definition, a market analysis is a complete assessment of a market within a certain industry. It is a powerful tool and an important component of a solid business plan. A thorough market analysis will give you priceless insight into not only the dynamics of your industry’s market, but also a clear vision of value, customers, industry competition, and more.
A market analysis should answer these questions:
- Who are my current and potential customers?
- What are my customers' buying habits?
- What companies in the industry are considered to be my competitors?
- What is the size of my target audience?
- How much will customers spend on my product or service?
In addition, a market analysis gives a clearer vision of supply and demand, and the market’s prediction of pricing for a product or service. A feasibility analysis is also an important part of evaluating your business. This report gives a good indication whether a product/service will meet the financial and social goals within the market.
What a Market Analysis Can do for Investors
Savvy investors know that a market analysis is an excellent opportunity to help them evaluate the potential of a local area, since the analysis is a qualitative and quantitative valuation of the market in which you intend to invest.
It is helpful to learn things like the volume and value of your market, as well as the different customer segments, purchasing patterns, business competition, and the economics of the local area in regard to regulations.
This information allows investors to get insight to all aspects of a project, including the positive and negative points, before their investment. Here are some of the top influencers and how they can affect the investment.
Top Investment Influencers
- Legal – Laws and regulations are crucial in the business world. Many of these can affect a business in a variety of different ways. From consumer laws to safety standards, it is important to be aware of potential influences.
- Politics – Governments can influence an industry or economy with tax policies, trade tariffs, fiscal policy, and more.
- Economy - An economy’s performance can directly impact an investment and have long-term effects like interest rates, inflation, economic growth patterns, foreign exchange rates, and more.
- Environment – Many industries, like hospitality and tourism, can be greatly affected by environmental issues like weather, location, and climate.
- Social - Social influences like cultural trends, population analytics, and demographics play a part in the success of an investment.
- Technology – Advances in technology can significantly influence the market in positive and negative ways.
3 Must-Know Facts About a Market Analysis
- Local Market Understanding - A thorough understanding of your local market is crucial for success. In addition, knowing the company’s vision and objective is needed to competently analyze the opportunity. Furthermore, meeting with key stakeholders, interpreting market data, learning about the macroeconomic situation of the area including Employment, GDP, and sector importance can pave the way for future success for your business. Observing and understanding the market goes a long way when it comes to making the best strategic decisions so that you can properly determine just how well your project will work within the market.
- Competent Data Management - The competent management of your data is a must for savvy investors. This market research data should give you confidence in your decision to support or reject the project based on financing, investment, and operation data. This means competent data that is actionable and helps you gain insights for educated decision-making is imperative.
- Key Data to Manage
- Economic variables can be helpful for projections of key hotel metrics including GDP and CPI to help you learn more about industry metrics like Rev PAR and ADR.
- Market data can give an indication of the number of guests that could potentially have interest in your property.
- Consider the local work force when determining key factors that will influence hotel demand like large area employer’s need for office space and convention centers.
- Tourism, seasonality, and the local transportation infrastructure can play a huge role in the success of your location, so this data is priceless.
For a good presentation for investors, you should be prepared to answer questions and include these topics:
- A summary of the deal proposed
- A clear recommendation for which you are asking
- Sponsor and sponsor details
- Substantiation
- Summary of assets
- Summary of liabilities
- Market summary
- Risks and mitigations
- Investment assumptions
- Exit strategy
Return on Investment
A successful presentation will leave the audience informed and enlightened about their investment options, no matter who your audience is. They should leave the presentation with a clear vision and understanding of your project; especially how it benefits them.
Top 5 Benefits of Conducting a Market Analysis for Your Hospitality Business
Not only should your business plan include a market analysis, but it is beneficial to conduct a marketing analysis each year for your hospitality business to stay aware and ahead of any major market changes that may affect your business.
While the most common benefits of a marketing analysis include the reduction of risk, information on how to increase project revenue, and a great way to stay on top of emerging trends; there are additional benefits that are important. Here are some top reasons why conducting a market analysis is a good idea for your business:
Top Benefits of Conducting a Market Analysis
- Insight About Your Customers – When you know exactly what your customers want from you, meeting their expectations is easier. This knowledge allows you to ensure that your business’s products or services are in line with what they are looking for.
- Periodic Business Evaluation - A market analysis allows you to keep track of the success of your business and also allows you to compare your company to industry rivals to see how you are doing and inspire growth and policy updates when needed.
- Business Observations - Studying your market analytics allows insight to how your business is doing. From product performance to customer preference, this is priceless knowledge needed to make necessary changes to excel during the next market analysis.
- Better Marketing Focus – Conducting a yearly market analysis lets you assess how well your efforts are working in your favor. Based on this data, you can focus your marketing efforts on areas that need improvement to increase sales and market shares.
A thorough market analysis each year is a great way to ensure you are on top of your marketing game and are successfully reaching your target market for your hospitality business.
Follow These Steps to Conduct a Market Analysis for Your Hospitality Business
Conducting a thorough market analysis is a lengthy and detail-oriented process. There are seven main steps for a productive analysis.
-
Define Your Goal - The purpose of your market analysis should be defined so you can be sure to gather the appropriate info to gauge your progress. Sticking to this goal will guide your research for data.
-
Learn Your Industry – Knowing your industry is crucial to understanding what you need to do to compete and grow your business. In addition to an annual market analysis, a comparative market analysis is also helpful to gain an edge in a competitive market.
-
Know Your Target Customer - Use your target market analysis research to focus your marketing dollars on reaching your prime audience to avoid wasting time and energy on those who do not match your typical client criteria. Consider age, gender, location, interests, location, occupation, and more for accuracy.
- Analyze Your Competitors – Know exactly who your customers choose when they do not choose you. Knowing the market includes understanding the businesses that are directly competing with you. Find out how they operate and determine their strengths and weaknesses in the industry for the best success.
- Collet As Much Information as Possible – Gather as many details about your business and industry as you can. Finding factual information is crucial, so be sure to explore reputable sources including trade journals and publications, local, state, and national commerce sites, and any government statistic sites.
- Data Analyzation – Once you have sufficient accurate data, it is time to analyze the information. Research to find these answers.
- Size and growth rate of your industry
- Projected market share percentage of your business
- Future outlook for your industry
- Target audience buying trends
- Forecasted growth of your business
- Cost customers will pay to use your product or service
How to Use Your Completed Market Analysis for Your Hospitality Business
Now that the hard work is complete, it is time to use your data to enhance your hospitality business. Implement new processes to be more effective; improve your marketing strategies to better reach your target audience; create more products or services to add to your revenue....do everything possible to identify your main goal and stay focused on results.