Redefining Hotel Market Segmentation

By Nicholas Tsabourakis Founder & Managing Director, Bespoke Revenue Management | April 22, 2018

Market segmentation is of particular importance in the complex and competitive hospitality world of today because it does not only help put things in perspective, but also ensures that you won't have to waste money and efforts in areas that won't bring any positive results.

Cost of acquisition and contribution by revenue source are extremely important factors that need to be taken into consideration when managing a business in the highly competitive and ambiguous hotel management industry, which is another reason why market segmentation needs to be leveraged. Doing so will not only help you understand where your customers are coming from, but it will also be easier for you to figure out which areas need improvement and which customer groups you should focus on more for greater revenues.

Still not convinced? Below, we're talking all about why market segmentation is so important, how it's done, and how market segmentation can prove to be beneficial for any hotel.

Benefits of Effective Market Segmentation

  • Leads to better customer understanding - Lays the foundation of understanding customer behaviour, booking patterns and spending habits. This can lead to improved and personalised service
  • Leads to superior insights – Segmentation is the cornerstone of Revenue management and guides efficient and accurate forecasting combined with insights such as booking pace, channel and geographic origin of business statistics etc.
  • Leads to enhanced pricing and optimization strategies - Strategies take into consideration spend by revenue stream and therefore lead to more effective plans
  • Leads to effective use of budgets - Effective segmentation provides guidance for better utilization of both marketing and operational budgets. Targeting the right audiences at the right time guarantees better conversion of promotional activities
  • Leads to increased profitability - Contribution by segment provides a way to not just increase revenues but also profitability across the entire operation. Optimum Business Mix is now comprised of indicators that highlight the impact of each segment on profit performance 

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Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.