Market Segmentation is a necessary element to apply several other hotel revenue management principles. It is useful for identifying different consumer segments in order to customize marketing initiatives to target those groups. One of the more common general examples of market segmentation is breaking guests down into those traveling for business purposes versus those traveling for leisure.

What is Market Segmentation For?

Market Segmentation is used for more accurately creating marketing campaigns and materials for different customer demographics. It allows revenue managers to create offers that are more accurately matched to the needs and budgets of varying consumer groups. Market segmentation is also used to identify individual bookings from group bookings.

Benefits of Market Segmentation

Market Segmentation is very important to understanding booking trends for hotels. Some examples of factors used in market segmentation include length of stay, no show ratio, booking lead time, booking value, cancellation rate, seasonality, and specific days of the week of stays. The most common categories for market segmentation are price, product, and distribution channel.

Limitations of Market Segmentation

The growth in popularity of online bookings has made it more difficult for hotels to accurately segment customers. Source segmentation is easiest if a hotel has an online analytics system in place. Otherwise, tracking distribution channels for online sales can be a challenge.

How is Market Segmentation Performed

Market Segmentation can be performed based on a large number of factors. For example, a hotel might want to segment internet bookings from walk-ins. Similarly, hotel managers or operators might also want to segment corporate groups from individual travelers. Some other examples of hotel segments that can be used to differentiate the purpose of guest visits include weddings, special events, conferences, and incentive-based trips.

Hotel managers can also segment guests by bookings through seasonal promotions, indirect bookings through travel agencies, corporate bookings through tour operators, direct bookings over the phone, overbookings from other nearby hotels, and other factors.

Examples of Market Segmentation

Here are a few more examples of market segments:

– Public via the Best Available Rate on your website
– Special Event Packages During Holidays or Festival Season
– Government Negotiated Rates
– Corporate Dynamic Rates
– Complimentary Bookings
– Bookings Through Offline Campaigns in Print Publications