Every seasoned hotelier would agree that hotel segmentation is one of the key components of a viable hotel revenue management strategy.
NB: This is an article from Oaky
Not only does it help you understand your guest segments and their booking behaviours, but it also allows you to cater to their unique needs and match different budget levels more effectively. Unlike a cookie-cutter approach to your pricing, hotel segmentation also enables hoteliers to play it smart and earn more revenue by providing different services at varied prices to different consumer groups.
Subscribe to our weekly newsletter and stay up to date
The best part is that you can apply guest segmentation to both your hotel room inventory and upselling management.
Explore how to leverage hotel segmentation and which guest segments you can consider to group your audience into to provide more targeted offers and calibrate your pricing to fit different budgets.
What is the most common market segmentation in the hotel industry?
Regardless of the type of hotel, guests are placed into segments based on behavioural patterns and price sensitivity. Some of the typical customer segmentation in the hospitality industry looks as follows:
- Transient – the transient segment comprises people who travel individually and do not belong to any group or company. They make bookings based on their own choices, aiming to catch the best available rates (BAR).
- Corporate – this segment refers to companies or corporates that house their employees in the hotel. Companies usually get discounted rates and other perks at the hotel.
- Group – As per its name, this segment refers to a group of people who have travelled together to the hotel. Many hoteliers often give groups reduced rates.
- Wholesale – The wholesale segment consists of booking agents and tour operators. They usually make bookings in bulk at discounted rates.
- Other – This segment usually consists of complementary and overbookings segments, walk-in guests or guests staying through bartering (e.g., influencers).
To group your guests further and create more detailed segments, you can also take into account the following factors:
- Geographical – This refers to segmentation based on the physical location of your guest, such as a country, city, etc. This helps identify where the guests are coming from and their economic status.
- Demographic – This factor encompasses aspects such as age, gender, and ethnicity. It will help you identify which group of people prefer which experiences and make arrangements based on them.
- Psychographic – This factor includes psychological characteristics such as personality, values, and beliefs.
- Behavioural – It is based on the behavioural patterns of the customers, such as user response, attitude and customer loyalty. This helps identify which marketing methods work for which customers.
By keeping all these factors in mind, you will be able to shape well-thought-through offers and deals that will more resonate with your guests increasing your chance to drive more ancillary revenue.
Why is hotel segmentation important? [5 benefits]
As mentioned above, hotel segmentation will help deepen your understanding of your target guest groups, get more insight into how they are making bookings, and learn about their expectations. With this information up your sleeve, you can tailor your offers and increase your revenue by suggesting the right offer to the right guest — be it a room upgrade or an upselling add-on.
But the benefits of defining your hotel guest segments go far beyond. One of the major advantages is that hotel segmentation can give you all the data you need to harness your full hotel’s potential.
