Market segmentation the fastest way to recovery for hotels

23 February 2021
It is time to rebuild revenue in hotels all over the world. The competition will be fierce since the supply will be much higher than the demand for the next few years. Guests will be able to select a hotel with the best fit for their needs. The key to success is to focus on the market segments that have the best fit for the hotel and leave other segments to your competitors.

The reason for travel

Before the pandemic hotels were overwhelmed with the flow of reservations. The hotel industry was thriving and there was no end in sight of the strong growth of travel and tourism. In this market, the only analysis needed was for improving marginal revenue by optimizing the occupancy and average rate. With the pandemic, all this changed. The industry has been thrown back in time and have to re-start thinking about the fundamentals.

In this new low volume normal, hotels need to understand the reason for travel and realize that accommodation is only a complement service to the reason for travel. If there is no reason for travel, there will not be any need for accommodation.

The pandemic has accelerated already existing trends with many years. One strong trend is that work becomes more digitalized. During the pandemic, almost everyone had to use video meetings instead of physical meetings. The benefits outweigh the disadvantages. Primary benefits are saving time and money, less stress, and lower climate footprint. Disadvantages include less personal relationships. The reason for travel for standard meetings disappeared overnight and will not return to its full volume for many years. This is one example of why hotels need to understand the reasons for travel.

Smart market segmentation

From a marketing perspective, a hotel would like to reach only those people who have a reason for travel to the destination. This minimizes the acquisition cost and increases the bottom line. Analyzing a poorly structured and irrelevant segmentation will make the wrong decisions about marketing, sales, and revenue, which might heavily impact market share and the bottom line.

A commercial team in a hotel that fully understands the real reasons for travel to a destination will be able to capture a higher share of the market at a premium rate than their competitors.

Market segmentation is only one dimension when analyzing the business. By analyzing other variables such as the feeder markets together with market segments a hotel will be able to understand from which country/city the reason for travel attracts visitors. Analyzing other variables such as booking window, channels, rates and length of stay will add valuable insights and increase the possibility of capturing more guests.

We have prepared a whitepaper about segmentation based on the reasons for travel as well as all the details on how to implement the segmentation structure in your hotel and PMS. The first part will give the background and reasons why market segmentation is the fastest way to success. The second part has templates to make it easy to create the right market segments for your hotel. Follow the link to the right to download the paper.

Help in analyzing segments

Demand Calendar makes segmentation analysis easy

Everything by segment

Demand Calendar shows on-the-books, pick-up, feeder markets, purchase- and booking behavior per segment.

Focus on the most important

Our philosophy is to help the user of Demand Calendar to focus on the most important segments first. That is why the largest segments are on top. If time permits, then it is possible to drill down to smaller segments and all the way to a specific room night.

Easy access for the whole team

Demand Calendar automatically collects all the data to one place that is easily accessible for every team member. Marketing, sales, revenue, and top management work with the same data and get the same information and insights.