Marketing segmentation is the process of dividing your customers into groups, so you have a clear understanding of where your business comes from. Are your guests individual or group travelers? Where do they live, how and when do they book, and what is their price sensitivity? Why do they book your hotel?
Consumers in a certain segment, who share certain traits, will also respond similarly to marketing strategies. Hotels with smart, in-depth market segmentation have, to put it simply, better control over their businesses.
Defining Market Segmentation for Hotels
Market segmentation, or dividing your hotel’s business into categories, often focuses on product, pricing, and distribution.
“Each segment tends to have a different booking behavior. It's important to be able to segment out your business, so you know who books when, what kind of rates they book, and just what their booking behavior is,” says Nicole Adair, SHR Corporate Director of Revenue Management.
“It also gives you information about their travel patterns,” she says. “Different segments will tend to travel on a different day of the week or a different month out of the year, for instance, and knowing this lets you forecast your segments.”
How Hotels Use Market Segmentation Data
Your sales team likes market segmentation reports because they clearly delineate pace and trends. Perhaps the reports show that a certain part of your corporate segment has been trending downward for the last year. Your sales staff can investigate why you are losing that corporate business and figure out what you need to do to get it back.
Segmentation information is also valuable to the marketing department. “Maybe there's a soft period,” says Adair, “or a segment that doesn't travel on weekends, or travels very heavily on weekdays. Knowing this lets you come up with marketing strategies to help drive their business into places where they're not booking right now.”
Knowing a consumer group’s behaviors lets you target it by presenting offers that match its needs and budget. And being able to be this specific can make your marketing more cost-effective.
As for revenue managers, they use carefully defined sets of market segments to determine the best pricing per segment as well as distribution. That information is also important for reporting and tracking.
The true value of market segmentation, says Adair, is that it shows you where to focus your efforts. “If you know that certain segments book in a certain pattern, you can work on getting that business to your hotel. You can focus on that segment where they book heavily.”
In the past, hotels paid a lot of attention to the separate segments of leisure and business travel. But booking methods have changed so much—with people booking online, for instance, and companies using online travel agencies—that it can be hard for some hotels to determine who is traveling for business and who is booking a vacation.
This is why it’s so important to get accurate, relevant, and actionable data on source and segmentation from your CRS and analytics systems. Make sure you train your front desk staff about this, because it’s critical that they gather guest information. Once a guest has checked in, the front desk staff member should know why the guest is there and be sure it is noted on the reservation.
It’s not enough to merely set up market segmentation—it’s also a good idea to occasionally re-evaluate your segments to be sure they remain current and useful. While you need some continuity in order to compare data year-to-year, adjusting segments from time to time can make your tracking and forecasting easier and ensures they are more accurate.
“There are so many ways people can book now that it's really important you keep track of and understand where your business is coming from,” says Adair. “It’s important so you can get the proper distribution strategy and rates out there, control the business mix your hotel is getting, and manage it properly to maximize your revenue.”