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Hotel Market Segmentation

One of the components needed to apply hotel revenue management is market segmentation. It allows you to target and market to a variety of consumer groups with different behavior with an offer that matches their needs and budget level.

Your hotel market segmentation shall help to identify the purpose of the trip: either business or leisure. The price does not decide of the market segmentation. Clear distinction must also be achieved between individual and group business.

The market segmentation shall help you identify the trends of your business:

  • Length of Stay
  • Day of Weeks stays
  • Total Revenue per room, Total Revenue per client
  • Booking Lead Time
  • Cancellation %
  • No Show ratio

Today's ways of booking make it difficult to identify the purpose of the trip. Segment by default the individual bookings for short midweek stays as business. Identify as leisure reservations of double rooms over the week-end.

And which market segment to apply to Internet bookings? You can also introduce the following question in the reservation process on your hotel website: Is your reservation for business stay or leisure?

You may want to introduce sub-segments such as your pricing points such as BAR and how yieldable the segment is.

market-segmentation-rmb3

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Here an example of a hotel market segmentation :

  • Public
    • BAR Website -  Best Available Rate sold throught the website
    • BAR Direct - Best Available Rate sold direct by phone, email, fax
    • BAR Indirect Commissionable  - Best Available Rate sold trough commissionable online travel agencies
    • BAR Indirect Net - Best Available Rate sold trough net rate online travel agencies
  • Promotions
    • Opaque; hidden hotel discount programs
    • Flash Sales; promotional website offering membership discounts
    • Mobile; mobile websites offering sameday or lastminute discounts
    • Online Campaigns; internet publication offers and packages
    • Offline campaigns; print publication offers and packages
    • Special Event; packages and offers during holidays, festivals, concerts
  • Negotiated Rates
    • Corporate Dynamic Rates
    • Corpororate Flat Rates
    • Government
    • Crew
  • Groups
    • Leisure
    • Business
    • Conference / Banquet
    • Incentive
    • Wedding
    • Events
    • Crew
  • Wholesale
    • FIT
    • Tour Operators
    • Wholesalers
  • Other
    • Complimentary
    • Barter
    • Walk-In
    • Overbooking (from another hotel)
    • House Use
    • Time Share

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The above segmentation is a general guideline. You may find that for your hotel teher are other segments which are not included, or a simpler segmentatioin would be more applicable. Each hotel has to decide what segmentation best fits their market and property.

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