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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Guest Service: A Culture of YES

In a recent global consumers report, 97% of the participants said that customer service is a major factor in their loyalty to a brand, and 76% said they view customer service as the true test of how much a company values them. And since there is no industry more reliant on customer satisfaction than the hotel industry, managers must be unrelenting in their determination to hire, train and empower the very best people, and to create a culture of exceptional customer service within their organization. Of course, this begins with hiring the right people. There are people who are naturally service-oriented; people who are warm, empathetic, enthusiastic, pleasant, thoughtful and optimistic; people who take pride in their ability to solve problems for the hotel guests they are serving. Then, those same employees must be empowered to solve problems using their own judgment, without having to track down a manager to do it. This is how seamless problem solving and conflict resolution are achieved in guest service. This willingness to empower employees is part of creating a Culture of Yes within an organization.  The goal is to create an environment in which everyone is striving to say “Yes”, rather than figuring out ways to say, “No”. It is essential that this attitude be instilled in all frontline, customer-facing, employees. Finally, in order to ensure that the hotel can generate a consistent level of performance across a wide variety of situations, management must also put in place well-defined systems and standards, and then educate their employees about them. Every employee must be aware of and responsible for every standard that applies in their department. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.