LAUSR

Abstract This study examines the financial consequences of competitive set choice using a sample of 312 hotels in a major metropolitan area in the United States. We document existence of asymmetric competitor monitoring, finding just 55% of monitoring is reciprocal; that is, about half of managers “agree,” by virtue of monitoring one another, on being direct competitors. Monitoring reciprocity is positively associated with performance through average daily rates. With total revenue unchanged, profits are higher through lower occupancy and lower total costs. We examine alternative competitive sets formed using strategic groups- and customer-based approaches, comparing these to actual compsets. We found that performance declines when managers deviate from these alternative sets. Post-hoc analyses provide insight on how overlapping compsets impact rates, occupancy and revenue. Our study is of value to academics and practitioners, providing evidence on the financial impact of competitive monitoring, and insights for managers who choose competitive sets.