Market sizing

Hi,

Remember that there's rarely a "best" answer with market sizing. What's important is that you break down the problem the way it makes sense to you. Importantly, break it down so that the assumptions you make are the ones you're most comfortable in.

For example, do you know all the major brands? Great go with that. Do you understand all the segments of that country's population (either age or wealth or job breakdown)? Go with that. Do you know the total market size of the tourism (or hotel) industry? Then break it down that way.

Given the way you've broken it down, maybe think about how you can break down the groups to figure out # of stays per year. I.e. x % of the population travels for business routinely (so, 4 days a week, 52 weeks a year). Another x % travels occasionally for business (work trips), so x weeks a year. And a final x % travels for vacation (x weeks a year). Then, given occupancy rates are normally around 80-90%, figure out how many nights (rooms) that represents, and the average # of rooms per hotel!

Take a look here for additional practice! https://www.preplounge.com/en/management-consulting-cases/brain-teaser/intermediate/taxis-in-manhattan-market-sizing-229

(edited)

Hi there,

As long as you have the right logic right, there could be more than one way to arrive at an answer. In this particular example you mentioned, either sequence can work, be it geo first then business vs leisure or the other way round.

Don't over think it. :)

Best,

Emily

Hi,

I suggest to undertand well what the interviewer is expecting from you. Some of them they just see it as a little game and would be happy to see you making up some numbers on the supply side. For example, you know there must be more than 100 hotels in London. Is it reasonable to assume there might be 1000? Once you get that number, you can assume an average maximum capacity and get a quick answer.

If you have to offer a more developed answer, try to be creative and create bottlenecks. For example, in the case of London you could calculate how many passengers per day land on London´s airports. Assume there is only one runaway which only half of the time is used for landings. Do it yourself and calculate a number of passengers landing on London per day.

Then, to improve a little bit your numbers you can say that 1 out of 1,000 of the remaining population of the UK will have to travel to London. When you get all your numbers you can say that the average number of days that people stay in a hotel is 5. With all that data you can give a reasonable answer that it is not too complicated.

Do not forget to show them how "smart" you are. Mention AirBnbs, trains, ships, etc.., but get a reasonable number as fast as possible!

Best,

Hi.

I like your outlined appraoch

1. International Visitors - easiest to estimate tourists and then apply a % cut to get business

2. Domestic Travelers - same thing, easiest to estimate total travel and say 75% tourism and 25% business (or whatever number makes sense given the country)

The process to estimate can be either things you have read or things you know about the country. Any reasonable guess that has clear logic will be fine here.

In order to get to hotel rooms - you would have to make some assumptions. For example

• Tourist occupancy - 2 to 4 per room (depending on family size) so pick a reasonable number
• Business - safe to assume 1 per room on avg
• Duration of stay
• Time periods (e.g., business travelers prefer Mon-Thu and vacationers Fri-Sun)
• Alternatives such as Airbnb if you want to make it complicated

Demand side works best for these types of market sizing question - supply side only works well if supply side is constrained. Here there is no reason for hotel supply to be constrained in any way

All the best,

Udayan