9 min read
Every reservation tells a story, so a hotel must understand how these bookings contribute to its overall business.
But how does a hotel know which market segments perform well and which do not?
Today we'll look at how a clear overview can help hotels identify revenue-driving segments, reveal business trends, and set prices and distribution early.
Table of contents:
Hoteliers that succeed with hotel market segmentation do several things very well:
First, they define the market segments for their property and understand which of them contribute the most to the overall business.
Second, they use their organization’s resources—like a hotel market monitoring solution—and teams to track segment performance and scale the actionable insights to tailor sales (price-setting) and marketing (special offers) efforts.
So let’s unpack market segmentation for hotels.
Market segments allow a hotel and its sales and marketing team to target and promote its inventory to an assortment of consumer groups.
And because these groups have diverse behavioral sets, the offer a hotel makes to each should correspond to their needs and wants and their budget level and price sensitivity.
Since these can get rather complex, let’s focus on the most accepted forms:
Indeed, hotels must make a clear distinction between individual and group business when choosing how to segment.
And be aware of which channels drive visitors to the hotel:
Channel segmentation for hotels looks at where bookings originate.
Its purpose is to help hotels determine the cost of acquisition and the booking value for each channel.
It is also important to remember:
Hotels have to get the data in market segmentation right as it is the most crucial element.
And thankfully, CRS (Central Reservation Systems) and PMS (Property Management Systems) integrations can automate the process of linking each booking to the correct segment and channel.
Getting the set-up and data mapping in these related systems right can:
Having established what segmentation is, let’s shine a light on why this is so significant:
Market segmentation in the hotel industry is essential because it can help identify the reason for a drop in reservations.
Hotels that can attribute a cancelation to the individual reservation type can audit and adjust pricing strategies as needed.
For example, when a hotel tests dynamic pricing in leisure destinations.
But that’s not all.
Here are several more reasons why market segments in the hospitality industry are important:
This one is the most apparent gain, and most, if not all, hotels already do this. But it bears repeating.
A hotel's profit and loss statement that can highlight these areas are worth its weight in gold.
Trends and metrics that hotels must keep track of include:
These are just the tip of the iceberg when it comes to business trends.
As mentioned above, hotels that attribute trends appropriately can audit and adjust where needed.
Hotels that understand their visitors in more detail today can optimize for customer satisfaction and marketing efforts, resulting in more accurate personalization.
Segmenting guests in detail helps hotels paint a picture of which types of guests bring in business:
Combined, information on hotel market segments offers incredible opportunities for hotels:
The significance of an overview of market segments for hotels is:
Hotels can apply these values using the Segments feature inside HQ revenue’s analytics-driven Performance Board.
Our PMS analytics and KPI-tracking software solution visualizes hotel On the Books and real-time market data into actionable, continuous, and ready-made reports. Hotels can integrate their PMS data in a quick and easy way.
The Segments feature allows revenue managers to track and analyze their property’s revenue and pick-up by a definite buyers segmentation.
It lets them discover how each segment contributes to the hotel’s overall On the Books, such as:
Let's take a look at how in a practical example:
A hotel close to an airport or event location might be looking to segment its target market in this way:
What is a challenge the hotel might have? Besides needing to know what events entice travelers to visit the area?
Performance Board’s Segments feature breaks down the segments for the following periods:
The hotel will want to know a few things:
Here’s how the Segments feature looks up close:
For July 2020, notice the hotel’s four segments (mentioned above) add up as the most successful.
And see how each corresponds to the most important On The Books numbers:
Let’s go into more detail and find out how segments inform a hotel’s pickup.
For this bit, we will shift to an example from 2019 when COVID-19 did not impact business:
For 5 July 2019, we can see two important things:
Below, the hotel’s IND segment adds the most to the day’s 85% occupancy: IND at 38 edges out BAR with 25.
NB: Performance Board pulls in historical hotel data up to the last 90 days to display the pick-up. The numbers in green represent a positive development.
It gets better:
A closer look reveals BAR outperforms IND for room nights pick-up (total RN is 94) since three days ago:
One thing is clear:
Hotels can go in-depth into their segment performance.
After an analysis, the hotel can optimize its prices, budget, and cost-efficiency where necessary—based on the months that perform well for specific segments and which may not.
These analyses are just the tip of the iceberg when it comes to what's possible when hotels work with the Segments feature in Performance Board.
With these detailed insights in mind, what are the action steps that hotels can take?
The benefits of effective hotel market segmentation:
The key to effective Revenue Management:
A hotel sells the right room to the right guest at the right time for the right price through the right channel.
How a hotel identifies market segments that generate the most turnover could play out as follows:
Hotels may want to know if and when certain guest types book.
Given seasonality or special days around future events, having an idea of what segments make up hotel occupancy can be invaluable.
Hotels can use this information to evaluate allocations of rooms as necessary.
As mentioned earlier, it helps when the hotel can attribute certain cancelations to the proper segment types.
In this scenario, hotels can operate within a forward-looking strategy.
One possible way is:
The hotel sets appropriate room rates for specific segments early to attract more of the right guests.
In doing so, the hotel also keeps in mind this group’s price sensitivity.
Of course, the rates also have to align with competitor moves.
And here, access to real-time hotel market prices is vital.
Thank you for reading our detailed look into the rather complex topic of market segmentation.
It is a topic that goes relatively deep, precisely because the hospitality industry is so diverse.
To answer these questions:
Get started with the Segments feature in Performance Board. This entirely free-to-use analytics tool lets Revenue Managers devise action plans from rolling three-month insights and ready-made reports of their On The Books.
Get in touch with our revenue management experts to schedule a personalized demo.
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