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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Coming up in February 2019...

Social Media: Getting Personal

There Social media platforms have revolutionized the hotel industry. Popular sites such as Facebook, Twitter, Pinterest, Instagram, Snapchat, YouTube and Tumblr now account for 2.3 billion active users, and this phenomenon has forever transformed how businesses interact with consumers. Given that social media allows for two-way communication between businesses and consumers, the emphasis of any marketing strategy must be to positively and personally engage the customer, and there are innumerable ways to accomplish that goal. One popular strategy is to encourage hotel guests to create their own personal content - typically videos and photos -which can be shared via their personal social media networks, reaching a sizeable audience. In addition, geo-locational tags and brand hashtags can be embedded in such posts which allow them to be found via metadata searches, substantially enlarging their scope. Influencer marketing is another prevalent social media strategy. Some hotels are paying popular social media stars and bloggers to endorse their brand on social media platforms. These kinds of endorsements generally elicit a strong response because the influencers are perceived as being trustworthy by their followers, and because an influencer's followers are likely to share similar psychographic and demographic traits. Travel review sites have also become vitally important in reputation management. Travelers consistently use social media to express pleasure or frustration about their guest experiences, so it is essential that every review be attended to personally. Assuming the responsibility to address and correct customer service concerns quickly is a way to mitigate complaints and to build brand loyalty. Plus, whether reviews are favorable or unfavorable, they are a vital source of information to managers about a hotel's operational performance.  The February Hotel Business Review will document what some hotels are doing to effectively incorporate social media strategies into their businesses.