Market segmentation divides the overall market into sub-segments that are defined according to various criteria. Here we explain why this makes sense for your hotel.
- Definition of market segments in general and in the hotel industry
- “General” classification of market segments
- Advantages of market segmentation
Definition of market segments in general and in the hotel industry
Generally speaking, market segmentation can be based on this definition:
Division of the total market according to certain criteria into buyer groups or segments which should be as similar as possible within themselves (homogeneous) and as dissimilar as possible among themselves (heterogeneous) with regard to their buying behaviour or characteristics relevant to buying behaviour.
The main purpose of market segmentation is to uncover differences between buyers in order to draw conclusions for segment-specific marketing programmes.
For the hotel industry, this means we divide our guests into groups, each with common characteristics within a segment: where the bookings come from, what is the purpose of the trip and/or the length of stay, for example. These groups then show different behaviours and accept different offers. Thus, hotels can tailor their marketing and pricing directly to them.
“General” classification of market segments
Books and PhD theses have been written about market segmentation. There are many different approaches, which do not only differ by industry. Often the difference also lies in the depth of the classification.
We would like to concentrate here on presenting the most important segments in the hotel industry. We will not examine the many sub-groups that may exist.
Transient segment: These guests do not belong to any particular company and usually stay only a few nights. To them the hotelier can sell the best available rate (BAR). Sometimes these can be small groups, not just individual travellers.
Corporate clients: These guests benefit from corporate rates agreed between the hotel and the company.
Groups: These guests may be from the leisure or business travel sector. They also have contractually agreed room rates. For example, this includes corporate events, incentive events or even a wedding party.
It is also always advisable to develop and constantly monitor a segment of “others”. There, trends can become apparent that affect, for example, tour operators/booking agencies.
Advantages of market segmentation
The division into market segments offers clear advantages for hoteliers. We will explain some in more detail here.
- Identify profitable areas
Segmentation shows through which channels the “best” guests come, in which segment the hotel generates the most turnover and which rooms, for example, are marketed most profitably. - Identify trends
With hotel segmentation, you can see which days of the week are the best occupied, whether there are segments with high cancellation rates or how long in advance which guests book. This helps the hotelier to adjust the offer: He can use restrictions in a better way. - Identify guest potential/ optimise marketing
If you know the guest segments well, you can increase customer satisfaction in a targeted way and optimise marketing measures.
In summary, we can say that dividing guests into market segments can not only increase a hotel’s revenue by addressing them in a more targeted way. Moreover, the hotels are also able to offer their guests a very individual and thus satisfying experience.