Revenue management is no longer just about setting the “right” price for a room. A solid framework integrates data-driven decisions, dynamic pricing, guest segmentation, and cross-departmental collaboration. Hotels that master this framework don’t just survive; they thrive.
NB: This is an article from Demand Calendar
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Market Segmentation and Demand Forecasting
Why It’s Critical
Revenue management begins by defining which guests you want to stay at your hotel, not just understanding who has already stayed there. The desired guest profile represents a vision and a goal for the property. Identifying these target guests directs pricing, marketing, and operational strategies.
Hoteliers must also determine whether these ideal guests travel to the destination year-round and across all days of the week. Understanding these travel patterns allows hotels to align their strategies with guest behavior. After defining the target audience, the next step is conducting a comprehensive analysis to assess whether these guests currently book at the property. A robust business intelligence tool is essential to effectively analyze guest behavior and booking patterns.
Micro-market Segmentation
Market segmentation combines multiple variables to create micro-segments, allowing hoteliers to tailor strategies more precisely. The segmentation process typically includes:
- Travel Reason: Business or leisure.
- Guest Origin: Domestic or international.
- Distribution Channel: OTAs, direct bookings, corporate contracts.
- Booking Behavior: Early planners, last-minute bookers.
- Length of Stay: Short-term vs. extended stays.
By combining these variables, hotels can identify micro-segments and analyze:
- Volume of bookings
- Average rates
- Total revenue per segment
- Customer acquisition costs
This analysis helps determine the most profitable micro-segments, guiding marketing and sales strategies to focus on high-value guests.
Demand Forecasting
Once the target audience is well-defined, forecasting demand becomes more accurate. Demand forecasting enables hoteliers to predict when target guests will visit based on:
- Seasonal demand patterns (high, shoulder, and low seasons)
- Weekly patterns (weekend vs. weekday stays)
- External influences such as holidays, local events, and weather conditions
Aligning pricing and operational plans with these insights allows hotels to capture maximum revenue during peak-demand periods while optimizing occupancy during low-demand periods.
How to Implement
- Conduct a thorough analysis of existing guest data using a robust business intelligence tool to compare the current customer base against the target audience.
- Set a base price based on the target audience’s willingness to pay, ensuring perceived value aligns with pricing.
- Adjust prices dynamically—raise rates during high demand to capture the full market value and reduce rates strategically during low demand to maintain occupancy.
- Align marketing and operational strategies around the target audience’s preferences, from personalized offers to curated guest experiences.
