Benchmarking, according to Wikipedia, "Is the practice of comparing business processes and performance metrics to industry bests and best practices from other companies. Dimensions typically measured are quality, time, and cost."

This begs the question, "What are companies using benchmarking for?" According to Bain & Company, benchmarking is used to:

  • "Improve performance. Benchmarking identifies methods of improving operational efficiency and product design;
  • Understand relative cost position. Benchmarking reveals a company's relative cost position and identifies opportunities for improvement;
  • Gain strategic advantage. Benchmarking helps companies focus on capabilities that are critical to building strategic advantage;
  • Increase the rate of organizational learning. Benchmarking brings new ideas into the company and facilitates experience sharing.

In essence, benchmarking is the thermometer used to measure a hotel's performance against norms perceived to be the best industry standards and particularly against those of your competitors when such information is available.

The key question seems to be, however, who sets the benchmark and who are the "industry bests"?

In hospitality, the benchmark is usually based on one of three criteria:

  • Performance standards set by a hotel brand based on their own philosophy and requirements;
  • Performance standards set by a third-party quality assurance provider, usually based on the lowest common denominator to fit all types;
  • Guest reviews collected directly from guests, via a magazine rating system, or a third-party analyst.
How useful is benchmarking as competition analysis?

Any given hotel that scored 84 in the last audit receives the information that its peers scored 88, 86, 82 and 80, respectively. In addition, the respective departmental results are shared as well. What is this information worth? In this case, the hotel learns that some peers scored higher and some lower, and that its management and employees might have to make an effort to score higher (than its peers) next time.

Let's take a step back here and ask ourselves what the purpose of quality assurance is: Is it to score higher than the peer group? What would the hotel gain by doing so? Does it make one feel better to know that the peer group scored lower? Does it help when all results tend to converge into a mediocrity? Or is it simply to improve and perfect the quality of one's offering (regardless of what others do)?

What impacts the quality of benchmarking greatly is each and every standard that is used to ascertain the quality of a hotel's offering, and, as a consequence, the "so-super-important" score. For luxury products in general, should the standards be lax or very stringent and detailed? Obviously the ideal set of standards is very detailed (as the devil is in the details) and needs to prioritize things that the customers prioritize. Millennials? Emotional Intelligence? Guest Engagement?

However, if the benchmark is the yardstick by which performance is measured, should it be set at a realistic level instead of at an unobtainable height that doesn't offer any chance of success?

Shouldn't it therefore be fitted to, and actually tailor-made for, the customer rather than a one-size-fits-all-properties approach that also represents the lowest-common-denominator? For if standards are relaxed, mediocrity results across the board, impacting all the hotels and hotel groups being benchmarked against such standards.

On the other hand, if benchmarking were to make sense, the standards used by all participants would need to be uniform in order to be comparable.

This basic requirement of benchmarking contradicts the notion that standards tailor-made for the hotel's existing customer base or even any future customer group, are required if the guests are to be well served.

This leads to the conclusion that benchmarking and tailor-made standards for luxury products do not go together.

So why would a premium product market leader or anyone who strives to be one, consider benchmarking to be useful at all and instead jettison a tailor-made approach that matches the standards to the guests' expectations?

Some hotel operators have apparently realized the inherent weaknesses of traditional quality assurance, and as a result, added their own layer of tailor-made standards to the set of standards provided by the quality assurance provider. What does that do? Their hotels are benchmarked against other hotels with the exact same standards, and at the same time benchmarked against their own, more detailed and further-reaching standards. The best of both worlds? Benchmarking plus tailor-made?

Is it really practical for the Quality Assurance provider's inspector to assess using two sets of standards at the same time? One of the challenges for an inspector is to memorize every little detail of every interaction with employees in order to accurately assess their guest engagement and service quality, and having two sets to compare against increases the risk that standards will be missed, thereby reducing the effectiveness of the audit process.