How to segment the market for your hotel

For your hotel to have a targeted approach, it is important to break down the broader market into key segments usually based on the reason for travel. This, in turn, helps understand the main types of demand, the behaviour of the customer in each segment and also to understand future growth potential.

Typically, the broad segmentation for hotels is corporate (commercial), meetings & groups and leisure.

Market segmentation is only one of the factors that are used to understand and influence demand. Related areas like positioning, pricing and promotions all play an important role.

Why segment? One of the key reasons for segmenting is to allow you to target and market to different customer groups with different offers that meet their needs and expectations in terms of pricing. It also helps to identify the reasons for travel – usually business or leisure. And group business related to either of these may be different too.

Fast changes in how a customer books and what they seek as well as the wide variety of product offerings in the market make it imperative to understand your core market segments.

Identify average length of stay, preferred days of stay, booking lead time, cancellation and no show percentage, average revenue per room by segment.

So how do you know what makes a “sensible” segment? Ask the following questions of your segments

  • Are they relatively easy to measure? Ie can you identify where a booking came from?
  • Can you reach out to your segments easily? Ie can you promote your product and service to the segments without huge expenses.
  • Are they large enough for it to make sense for you to concentrate your efforts on?
  • And is it likely to be a source of bookings over a period of time?

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