Market segmentation essential for total revenue management
When more hotels are moving towards total revenue management, it is vital to rethink market segmentation. Hotels with many facilities, such as restaurants, bars, meeting spaces, spas, and golf, also attract guests not staying in the hotel. Each facility might have its market segments, so how should hotels applying total revenue management create a manageable market segmentation structure?
Definition of market segments in hotels
- Individual business travelers often prioritize location, convenience, and amenities such as high-speed internet.
- Business events such as conferences
- Business groups
- Individual leisure travelers may value location, scenic views, relaxing recreational activities like a spa, pool, or adventures, outdoor recreation, and excitement such as hiking or extreme sports.
- Private events such as weddings, parties, etc.
- Leisure groups
Overview of total revenue management
The Purpose of market segmentation in the context of TRM
Steps in market segmentation
Identifying target markets
- Reason for travel to the destination: This involves segmenting the market based on the purpose of the trip, such as business, leisure, or special events.
- Origin of the journey: This involves segmenting the market based on where the guest lives, such as a specific city or region.
- Psychographics: This involves segmenting the market based on psychological and lifestyle characteristics to match the star rating and concept of the hotel.
Understanding customer needs and behavior
- Surveys and feedback: This involves gathering customer information through surveys, feedback forms, and other means. This provides valuable insight into customer needs, preferences, and opinions.
- Data analysis: This involves analyzing customer interactions and transactions to gain a deeper understanding of customer behavior. This includes data such as booking history, purchase history, and booking behavior.
- Market research involves researching market trends and customer behavior in the hospitality industry. This helps hotels to stay up-to-date on industry trends and customer preferences.
Evaluating the potential of each segment
- Market size: This involves assessing the size of each segment in terms of the number of potential customers and the overall market opportunity.
- Revenue potential: This involves evaluating the revenue potential of each segment, including the average spend per customer, the frequency of visits, and the overall revenue opportunity.
- Customer value: This involves assessing the value that each segment brings to the hotel, including repeat business, referrals, and customer loyalty.
- Competitor analysis: This involves analyzing the competition in each segment and assessing the potential for growth and market share.
Benefits of Market Segmentation in TRM
Improved targeting of promotions and discounts
Better allocation of resources
Increased revenue and profitability
Final thoughts and recommendations
- You should start with a clear understanding of your customers: Before you begin to segment your market, it's essential to have a clear understanding of your customers, including their needs, preferences, behavior, and motivations. This information can be obtained through market research, surveys, customer feedback, and data analysis.
- Define your segments: Once you clearly understand your customers, you can begin to define your segments by grouping customers with similar needs and preferences. This can be done based on factors such as the reason for travel, journey origin, psychographics, or any other relevant criteria.
- Tailor your offerings: After defining your segments, you can effectively tailor your offerings and experiences to reach and attract the right customers. This can include targeted promotions, discounts, pricing strategies, and tailored products and services.
- Continuously evaluate and refine your strategies: Market segmentation is an ongoing process, and it's essential to constantly evaluate and refine your strategy to ensure it remains relevant and effective. This can be done by monitoring customer feedback, analyzing data, and conducting market research.