Running a hotel is hard enough. But what if you’ve been tasked with finding opportunities to expand into new markets?

Plunging yourself into the unknown like this is daunting for even the most battle-weary veterans of the hospitality industry. So, where do you start? And how can you guard against the risk of failure if you choose the wrong location to expand into?

While this isn’t easy, there are steps you can take to reduce your uncertainty and alleviate your anxiety. And it starts with effective market research.

In this blog post, we define it, outline how to do it and discuss the data you need to bring it all together.

What is hotel market research?

Market research is the process of gathering, analyzing and interpreting data to understand a market’s dynamics, customer behaviors and competitive landscape.

For the hospitality industry, market research is vital because the success of your hotel depends on location, traveler demand, pricing trends and guest expectations – factors that can vary widely across different regions. 

Unlike industries with more static consumer behaviors, the hotel industry is influenced by seasonal trends, economic shifts and evolving customer preferences, making thorough research essential for informed decision-making.

We’d draw two distinctions.

For new hotels entering a market, market research helps you identify the most viable locations, target audiences and positioning strategies. It provides insights into demand drivers such as business travel, tourism and local events, allowing you to make data-driven choices about property type, amenities and pricing strategies. 

Without this foundational research, a new hotel may struggle to attract potential customers or face unexpected competition.

On the other hand, for existing hotels looking to expand into new markets, market research plays a different but equally crucial role. Rather than starting from scratch, you must analyze potential new locations in comparison to your existing portfolio, identifying where your hotel brand can successfully adapt or grow. 

You must assess market saturation, competitive positioning and operational feasibility to ensure a smooth expansion. Additionally, research can help determine whether to replicate your existing model or adjust your hotel’s offerings to align with regional demand and customer expectations.

Research is key to uncovering the best market fit

By providing deep insights into your target audience, market research is essential to identifying the best opportunities for your hotel’s success. Your ideal guests in one market may have different preferences, spending habits and travel motivations from those in another location. 

For example, a hotel that thrives on business travelers in a major city may find that a new market is dominated by leisure tourists with different expectations for amenities, pricing and customer experience. 

This might be an obvious point but you have to investigate it thoroughly, because understanding these distinctions allows you to properly tailor your offerings and positioning accordingly.

Additionally, if you conduct market research well, you can determine the most effective marketing, communications and social media strategies for reaching and converting potential guests. It uncovers key factors such as the preferred booking channels, messaging that resonates with the local audience and the types of promotions or loyalty programs that drive demand. 

By leveraging these insights, you can craft a targeted approach that maximizes occupancy and revenue in a new market.

How to research new markets in the hospitality industry

Researching new markets is critical to expansion success.

In this section, we outline the key steps in order – from identifying promising markets to analyzing competitors and data – to guide you in your decision-making.

Market identification

The first step in researching new hospitality markets is narrowing down which locations hold the greatest potential for expansion. Without a clear focus, you risk wasting time and resources analyzing too many markets or ones that don’t align with your brand, budget or broader business plan. 

By identifying a shortlist of promising destinations, you can streamline your research efforts and concentrate on the most viable opportunities.

To identify potential markets as a hotelier, you should consider factors such as travel demand, economic stability, tourism trends and the presence of your target audience. Reviewing internal performance data can also reveal patterns – such as frequent guests from a specific city or high demand for particular property types – that indicate where expansion might be successful.

Ideally, you should start by comparing three to five potential markets, ensuring a balance between a diverse range of options and a manageable workload for the next phase: data collection and analysis.

Data collection

Once you’ve identified potential markets, your next step is gathering the right data to effectively compare them. You’ll need to collect quantitative (and qualitative) information on key factors such as demand trends, occupancy rates, average daily rates (ADR), revenue per available room (RevPAR), seasonality and traveler demographics.

Additionally, understanding local economic conditions, business travel activity and tourism infrastructure is essential for evaluating long-term market potential.

You can conduct this research manually using public data sources like government tourism reports, industry publications and local business directories. You can also analyze online travel agencies (OTAs) and competitor websites to gauge pricing trends and guest demand.

However, manual research is time-consuming and in most cases lacks real-time insights, so don’t rely solely on this methodology or necessarily start with it.

A robust market intelligence tool like Lighthouse simplifies and improves the process by providing comprehensive, up-to-date market data in one place. Such tools offer dynamic reporting on competitor performance, pricing trends and traveler behavior, allowing you to make data-driven decisions with greater accuracy and efficiency.

One of Lighthouse’s most relevant tools is Market Insight. Among other things, it includes a heat map to help you easily visualize demand, allows you to view shifting demand up to 365 days in advance, helps you identify demand patterns with hotel and flight search trends, and shows upcoming market trends before your competitors see them. 

Data analysis

Your next step is to analyze this market data to uncover meaningful insights. This begins with cleaning it – removing duplicates, filling in gaps and ensuring consistency across different sources. 

Organizing key metrics like occupancy rates, ADR and traveler demographics into spreadsheets can help, but turning raw data into actionable insights requires more than just numbers. Visualizing trends through charts and graphs makes it easier to spot patterns, such as seasonal demand shifts or pricing opportunities.

Data analysis is crucial because it helps you compare markets objectively, ensuring you base your expansion decisions on facts rather than assumptions. However, challenges arise when dealing with large datasets, inconsistencies between sources or rapidly changing market conditions.

A Business Intelligence tool can simplify this process by automating data cleaning, generating visual reports and highlighting key trends. Instead of manually parsing thousands of data points, you can focus on strategic decision-making with clear, real-time insights at your fingertips.

Competitor analysis

Now you’ve identified promising markets, conducting a competitor analysis and segmentation is essential to understanding the landscape. The first step is accurately identifying competitors – hotels that cater to a similar target market, offer comparable amenities and operate within the same pricing tier. 

You can do this by researching on OTAs’ websites, reviewing customer feedback and analyzing local business directories. It’s also important to look beyond your direct competitors to assess alternative accommodation such vacation rentals or boutique properties that could impact demand.

Competitor analysis is crucial because it reveals whether a market is too saturated or has space for a new entrant to thrive. A market with excessive competition may drive down rates and reduce profitability, whereas an underserved market presents opportunities for differentiation. 

By studying competitors’ rates and pricing strategies, occupancy trends and online reviews, you can determine how to position your property effectively – whether by offering unique amenities, targeting a niche market segment or adjusting your pricing models.

Individual market considerations

Beyond demand trends and competition, you should evaluate specific market considerations that can significantly impact feasibility. 

Key factors include regulatory requirements, such as permits, zoning laws and tax policies, which vary by location and can affect operational costs and timelines. Additionally, infrastructure – including transportation accessibility, proximity to attractions and the availability of utilities – will play a major role in your hotel’s long-term success.

Cultural nuances are another critical aspect. Guest expectations, service standards and even marketing approaches can differ widely between regions, requiring your hotel to adapt its branding and operations accordingly. 

Furthermore, the cost of property and construction must be factored in: high development costs in one market may outweigh potential profitability, while a lower-cost market with growing demand could offer better returns.

To make an informed decision, balance these considerations with your data analysis; a market may look strong on paper but operational barriers or high costs could pose challenges that make another location a better fit.

Understanding new markets requires reliable data insights

As will be clear to anyone who has read up to this point or worked in this sector for more than five minutes, it’s impossible to overestimate the value of accurate, reliable and up-to-date data for most areas of effective hospitality management – and market research is no different.

Let’s quickly break this down.

Identify emerging market trends

The hospitality industry is constantly evolving, with consumer preferences, booking behaviors and market demand patterns shifting due to economic conditions, technology and global events. 

What worked in a market last year may not be effective today, making real-time data insights essential if you’re looking to expand. Keeping up with emerging industry trends – such as the rise of remote work travel, eco-conscious accommodation or changes in international tourism – helps you adapt and stay competitive in new markets.

Relying on outdated or incomplete data can lead to costly mistakes. You might enter a market assuming strong demand only to find that traveler preferences have shifted away from traditional stays toward short-term rentals. 

Similarly, failing to recognize a declining market trend could result in investing in a location where demand is shrinking. By leveraging up-to-date data, you can anticipate changes, make proactive adjustments and ensure your expansion strategy aligns with current market realities.

Uncover potential for market growth

Predicting market growth is challenging because it depends on various factors, including economic trends, tourism development, infrastructure investments and shifts in traveler behavior. A market that appears strong today could stagnate in the future, while an overlooked destination may be on the verge of rapid growth. 

Reliable data insights help you assess long-term potential by analyzing trends such as increasing visitor numbers, rising ADR and RevPAR, and upcoming developments like new airports, business hubs or major events that could drive demand at your hotel.

Without accurate data, you risk misjudging a market’s trajectory. Relying on outdated reports might lead you to invest in a declining market where tourism is decreasing or overlook an emerging hotspot where early entry could provide a competitive advantage. 

By leveraging real-time data and forward-looking indicators, you can make informed decisions, reducing the risk of expansion missteps and positioning your property for sustainable growth.

Inform a competitive pricing strategy

Dynamic pricing has become an essential strategy for hotels, allowing for the adjustment of room rates based on factors like demand, seasonality and market conditions.

 This flexible approach maximizes revenue by optimizing prices in real-time to capture the highest possible value. However, successful dynamic pricing requires access to high-quality, real-time data on competitor pricing, booking patterns and local demand fluctuations. With accurate data, you can adjust your rates strategically to remain competitive while still meeting your revenue goals.

Relying on outdated or incomplete data can lead to mispricing, either by setting rates too high, risking low occupancy, or too low, leaving revenue on the table. 

For example, without current data, it’s all too easy to overestimate or underestimate demand in a new market, leading to missed opportunities or underpricing. Real-time market insights help you respond to changes swiftly, ensuring your pricing strategy remains competitive and aligned with your market’s evolving needs.

Learn how to increase guest satisfaction

Data plays a critical role in helping you understand your customers’ preferences and satisfaction levels. By analyzing guest reviews, feedback surveys and online ratings, you’ll uncover valuable insights into what drives positive guest experiences – whether it’s the quality of service, amenities or location. 

Understanding these factors means you can more easily tailor your offerings to meet guest expectations and enhance customer satisfaction. But without reliable data, it’s harder to pinpoint areas for improvement or identify specific needs unique to a new market.

Relying on outdated or incomplete data can lead to misunderstanding guest expectations, especially in new markets where cultural or regional preferences may differ. 

For example, a hotel that doesn’t account for local dining preferences or common amenities might overlook critical aspects that could enhance the guest experience. 

By using real-time insights from guest feedback and market research, you can adapt quickly, ensuring you meet guest expectations and build long-term loyalty in any market.

Access data-driven market insights that set you up for success

A true leader in the hospitality industry, Lighthouse is recognized for the reliability and quality of its data and solutions, including  Market Insight, of which you can take a free trial.

Providing support beyond predictive demand intelligence, Lighthouse’s solutions take in real-time competitive pricing, business intelligence and distribution. 

There’s never been a better time to talk to us about how we can help you succeed at your hotel.

About Lighthouse

Lighthouse (formerly OTA Insight) is the leading commercial platform for the travel & hospitality industry. We transform complexity into confidence by providing actionable market insights, business intelligence, and pricing tools that maximize revenue growth. We continually innovate to deliver the best platform for hospitality professionals to price more effectively, measure performance more efficiently, and understand the market in new ways.

Trusted by over 65,000 hotels in 185 countries, Lighthouse is the only solution that provides real-time hotel and short-term rental data in a single platform. We strive to deliver the best possible experience with unmatched customer service. We consider our clients as true partners – their success is our success.

This article originally appeared on Lighthouse.