Market Segmentation – Know Your Business !

market segmentation SmartOtels

Market Segmentation – Know your Business

It sounds obvious, doesn’t it, and I am sure that you are very well acquainted with your business in terms of the revenue, occupancy, costs and profits (or loss).  You may be a “mine host” type who makes a point of meeting all of your guests and we’re always happy to hear about managers who do this – our business is “hospitality” after all.  Whatever your style, your business is fundamentally your guests and what I am looking at this time is getting to know them – not just the ‘who they are’ but ‘why they are with you’ and, crucially, the ‘how can I get more of them’.

We recently wrote a “back to basics” post in “Revenue Management – Why Bother” and promised to develop on from that with a series of posts that aim mostly at those exploring the benefits of revenue management now rather than those who embraced it enthusiastically some time ago.  The post referenced Market Segmentation and how we use that to develop forecasts of business for the year ahead and as the basis for marketing plans to achieve – and hopefully exceed – the forecasts.

With Market Segmentation, we break down where guests come from and how they booked their stay with you so that we can see patterns and spot which segments are ripe to be grown as a part of your business and how.  A ‘mine host’ general manager or your reservations team will have an impression of this but it’s just not the same as having the actual statistics – it’s surprising, perhaps, how often our impressions formed this way are flawed.  It’s important to create and manage these segments in your Property Management System (PMS) so that every reservation has market segmentation attached to it at the time it is entered.

Nowadays, with so many reservations made online, it can be difficult to obtain much information about why a client is booking (although it is easy to add a simple drop down selection for this on your own web site) so we identify segments by the rate basis on which they are booked and also an element of qualified guesswork – unless you specifically know otherwise, a single guest staying on Tuesday and Wednesday night is most likely to be a corporate guest.  A couple staying on Friday and Saturday nights are almost certainly leisure guests.

Different hotels will have differing segments, depending on the nature of their business – some serviced apartments in London in our SmartOtels Network have a number of guests who stay whilst receiving outpatient medical treatment at a hospital close-by.  That’s a very specific segment that most hotels and serviced apartments wouldn’t have.  It pays not to be excessively detailed in breaking down segments, whilst keeping enough differentiation to be able to be able to see clear trends and to use these for their intended purpose later.

So, keeping in mind that it will vary from one hotel to another, Xotels produced a good generic example:

  • Public
    • BAR Website –  Best Available Rate sold through the website
    • BAR Direct – Best Available Rate sold direct by phone, email, fax
    • BAR Indirect Commissionable  – Best Available Rate sold through commissionable online travel agencies
    • BAR Indirect Net – Best Available Rate sold through net rate online travel agencies
    • Opaque
    • Promotions
    • Special Event Rate
  • Negotiated Rates
    • Corporate Dynamic Rates
    • Corporate Flat Rates
    • Government
    • Crew
    • Offline Publications
  • Groups
    • Leisure
    • Business
    • Conference / Banquet
    • Incentive
    • Wedding
    • Events
    • Crew
  • Wholesale
    • FIT
    • Tour Operators
    • Wholesalers
  • Other
    • Complimentary
    • Barter
    • Walk-In
    • Overbooking (from another hotel)
    • House Use

Once you have market segmentation established, you will find you can identify clear patterns for each segment.  Your PMS will tell you how many reservations were made, how many roomnights received, how much revenue earned and so on and that you will be able to identify factors such as average rate, average length of stay, the typical lead time for reservations (how far ahead of the arrival date they are booked), normal cancellation factor for the segment and more.

You will already appreciate just how helpful this data for, say, the last year, is going to be in developing a realistic forecast of business for the year to come, from which the sales, marketing and revenue team can establish a marketing plan to achieve, or exceed, forecast.  More on that to come.

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9 thoughts on “Market Segmentation – Know Your Business !

  1. You really make it seem so easy with your presentation but I find this topic to be actually something that I think I would never understand. It seems too complicated and very broad for me. I am looking forward for your next post, I will try to get the hang of it!|

    • Many thanks for your feedback ! I can always be reached on e-mail at matthew [at] smartotels [dot] co [dot] uk for any specific advice or further explanation. Otherwise, I hope that the next post will pull this together and make sense for all of our readers. All the best, Matthew

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  7. When I initially commented I clicked the “Notify me when new comments are added”
    checkbox and now each time a comment is added I
    get four e-mails with the same comment. Is there any way you
    can remove me from that service? Many thanks!

    • Hi, I am sorry, I don’t know why that would be so – we just have the standard WordPress settings. I will check and see if I can remove you from notifications, as you requested. All the best, Matthew

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