Understanding Hotel Market Segmentation

What Is Market Segmentation?

Optimizing your hotel’s profits by classifying customer groups (Company, Agency, Internet, Group, etc.) by their different features can be defined as market segmentation. More simply put, you can define it as trying to distribute the risk and obtain optimum profitability by not putting all your eggs in one basket.

How Is Market Segmentation Done?

1-) First, you separate market segments, i.e. you determine your target customer groups. You can do this classification by using the distinct features of these customers. Some segments that have been accepted in hotel industry: Transient Direct, Transient OTA, Corporate, Group, Wholesale, MICE etc.

2-) You look at which segment contributes more to your profit mix within a plan and strategy. (For more information, you can watch the educational video below.)

3-) You calculate how much money you are spending for which segments while you are pulling your customers from these segments in, i.e. accommodating them. (Cost of Acquisition & Cost of Distribution)

4-) You measure the net profitability from the segments. (Net RevPar, GOP)

5-) After you have determined your most profitable segment, you can direct your advertisements towards it. If it is an online travel agency, you can optimize this channel.

6-) You can optimize according to all data you have obtained. It will determine your strategies, such as your pricing model, how much availability you will give to which segment, etc. and you can focus on integrating these strategies into your channel management technology and having more conversion through the most profitable channel.

7-) You can continue these 6 steps continuously.

You can also get more information about this subject by watching the video below.