Hotel Market

Segmentation
By : DR. Dino Leonandri, MM, CHA, CBM, CHIA

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Market Segmentation
Hotel market segmentation is the process of
grouping hotel guests into categories based
on their booking patterns and travel habits.
By segmenting hotel guests into market
groups, hoteliers are able to identify where
their business is coming from, spot new
business in the area, and drive hotel
revenue
4 types of market segmentation?
• Demographic.
• Psychographic.
• Geographic.
• Behavioral.
Demographic Characteristics
refer to traits such as age, gender, income, education, and occupation.
Businesses can use demographic data to create customer profiles and develop
targeted marketing campaigns. For example, a company selling luxury products
may target customers with higher incomes, while a company selling children’s
toys may target parents with young children.

Psychographic Characteristics
refer to traits such as values, attitudes, interests, and lifestyles. These
characteristics are often more difficult to quantify than demographic data but can
be equally important in understanding target audiences. For example, a company
selling eco-friendly products may target customers who are environmentally
conscious and prioritize sustainability in their purchasing decisions.
Geographic Characteristics
refer to traits such as location, climate, and culture. Businesses can use
geographic data to develop products and services that are tailored to the needs
and preferences of specific regions. For example, a company selling winter
sports gear may target customers in areas with colder climates and a higher
likelihood of snow.

Behavioral Characteristics
refer to traits such as buying habits, brand loyalty, and usage rate. These
characteristics can be used to segment customers based on their purchasing
behavior and develop marketing campaigns that are tailored to their needs. For
example, a company selling subscription-based products may target customers
who have a history of regularly purchasing subscription-based services.
 Market segments can vary by property type, but typically they fall into five main
categories in the hotel industry:

1. Transient
These guests are individuals traveling for business or leisure. They typically
reserve directly with the hotel or through an online travel agency (OTA) or travel
agent at non-negotiated rates. Some hotels break down transient business into
subgroups such as OTAs, direct bookings, packages, and consortia.

2. Corporate negotiated
These guests are business travelers who work for a company that has a
negotiated account with the property. Corporate agreements are typically
arranged through the hotel’s sales department and require the company to
commit to a minimum number of room nights per year in exchange for discounted
rates and other benefits.
 3. Group
These guests travel with a group that has reserved a block of rooms in advance
at a special group rate. Typically, a group consists of at least six to ten rooms per
night, but that can vary by property. Larger properties may break down group
business into subgroups such as corporate, incentive, and SMERF (which stands
for social, military, education, religious, and fraternal).

4. Wholesale
These are travelers who book through a wholesaler or bed bank that has
negotiated net rates with the hotel. Wholesalers resell rooms to third-party
retailers like tour companies, travel agencies, and OTAs, who in turn sell the
rooms to travelers. Wholesale guests usually travel for leisure purposes and are
booked as FITs (free independent travelers) or tour groups.

5. Other
This segment is used for independent travelers who don’t fall into the other
categories.
Examples include: guests traveling on government business or members of the
military.
 Why do you need market
segmentation?
By grouping guests into segments, hoteliers can better understand and manage
their business mix – the blend of traveler types that most frequently stay at the
property. Instead of treating all guests the same, they can tailor marketing
materials, guest communications, pricing, and services to meet the unique needs
and expectations of each market segment.

For example, group guests behave much differently from transient guests.
Groups often book well in advance, reserve multiple rooms at the same time, and
receive preferred rates. Transient guests, on the other hand, are less predictable.
They can book well in advance or walk in last minute, typically reserve only one
room at a time, and pay retail or best available rates (BAR).
 6 benefits of hotel segmentation
By grouping guests into segments, hotels can:

1.Be more targeted in marketing. Instead of trying to reach all travelers,

hoteliers can develop marketing strategies to appeal to their ideal guests. For
example, guests who book a package spend more on property because
accommodation is bundled with other services like breakfast and parking.
2.Maintain a diverse distribution strategy. Rather than depend on one or two
booking channels, hotels can target market segments on multiple distribution
channels such as OTAs, the GDS, and bed banks. If a certain segment isn’t
traveling, like corporate travelers during summertime, the property can focus on
other segments like transient leisure and wholesale business. Properties can
utilize niche OTAs to effectively target their guest demographics.
3. Boost revenue and profitability. Market segmentation plays an important role in a
property’s revenue management strategy. When demand is strong in multiple
market segments, properties have more opportunities to increase occupancy and
room rates. To boost profitability per booking, they can target segments and
channels that have lower guest acquisition costs, such as direct bookings and
group business.
4. Increase guest engagement. Each segment comes with different opportunities to
engage guests pre and post-stay. For example, when guests reserve through your
website booking engine, you can collect their email and send a pre-arrival
message to invite them to start planning their stay and follow up post-stay with a
special return offer.
5. Improve the guest experience. Segmentation allows accommodation operators to
tailor guest experiences to better meet needs and expectations. For example,
corporate negotiated accounts can be flagged to ensure guests always receive
last-room availability, are prioritized for upgrades, and are never relocated. This
will help ensure corporate agreements are renewed year after year.
6. Save operational costs. Different segments may have different behavior patterns,
helping hotels more effectively plan operations. For example, hotel groups often
arrive, depart, and take meals at the same time, allowing properties to schedule
staff and purchase food & beverage items more accurately, avoiding
overscheduling and over-ordering.
 Tools and resources to help with segmentation
1.Reservation systems to facilitate the booking process and collect guest data.
2.Property management system (PMS) to store data and provide insights into
demographics and purchasing behavior.
3.Revenue management system (RMS) to forecast occupancy and better
understand booking patterns and profitability across different demographics.
4.Guest engagement solution to collect information via digital registration cards and
surveys, and send personalized communications across target audiences.
5.Digital marketing solution to attract guest segments with targeted marketing efforts
across channels like metasearch platforms, retargeting ads, and more, along with
data insights through Google Analytics to better understand traveler behavior.
6.Google Analytics, better understand the behaviors of your audience, as well as
how your ideal demographic is interacting with your hotel’s website or brand.com
page.
 Get to know your guests
Which hotel guests bring the most business to your property? Identify the types
of hotel guests who regularly visit your hotel, noting their booking patterns, stay
preferences, rate flexibility, and other important details.

Identify the following traits for the most profitable market segments at your
hotel:
• Length of stay patterns
• Weekday vs weekend business
• Booking lead time
• Pricing sensitivity
• Cancellation percentages
• No-show ratios
• ADR and RevPAR per segment
 Analyze booking channels
To further aid in identifying your hotel’s market segments, look at the booking
method different travelers use. Channel segmentation helps hoteliers identify
where their hotel guests are coming from and which booking channels are most
commonly used for various traveler types.

Distribution channels frequently monitored by hoteliers include:

• Walk-ins
• Direct call
• Brand website
• OTAs
• GDS
• Metasearch
• Retail travel agents
• Voice reservations
THANK YOU
 Quiz
Question :

Explain the Benefits of Market Segmentation ?

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