I guess going from the demand side will be quite challenging so I'm trying to find a supply-side approach but I'm not very satisfied with what I've come up so far.
Many thanks !
How would you approach a market sizing of the hotel industry in any given country (US or France for instance)
1 answer
Hi,
I would try to make an estimation from demand side:
- We cant split market value into two components: $ spent by citizens of given country and $ spent by people from abroad. I think that we can make a decent estimation of percentage of reservations from abroad. I guess that for US it is less than 10% and for European countries slightly more (10-20%?). Not sure about that, but certainly it is not more than 20-30%, so we are not making huge mistake.
- Now we need to calculate how much $ do citizens of, let's say, US spend annualy. In order to calcualate that, I would split it into business travels and holidays.
- For business travels: x% of people 18-65 y.o. do business travels y times a year. Each travel is on average z nights and one night costs u.
- The same for holidays, but I would look at families
- edit: I forgot to mention that for 3. and 4. we need to include % of travels within given country
I checked numbers for US and it seems that this approach has passed sanity check. What do you think?
(edited)
Many thanks for your answser! I like your approach which is clear and MECE. I fear though that there may be a lot of estimates that would be hard for me to make precisely. I would have to guess for instance what is the % of Hotel stays vs Airbnb stays for leisure vacations etc. My first guess was to begin with supply ie #hotel x #rooms/hotel x occupation rate x average price /room x 365, but then estimating the number of hotels is quite challenging …. Anyway thank you for your answer, I think both approaches can work depending on which set of hypothesis you feel more secure dealing with ! — on Jan 22, 2018
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Market Sizing
Market Sizing Cases are used to test your quantitative and reasoning skills. The interviewer evaluates your structure, numbers-handling and business sense.
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