The changing corporate business

20 September 2022
Hotel revenue managers say segmentation is shifting and becoming more blurred, making it harder to distinguish between business and leisure travelers. Segmentation is still done the old way by assigning a segment to the reservation. Hotels had to do this when the hotel PMS was a new invention to filter reservations by pre-defined segments to understand guest categories. Hotels used this information to find more guests of the same types and know where to advertise.
Then, revenue Management Systems (RMS) created new segments based on rate categories, such as the BAR and the Discounted Rate segments, to use in their algorithms. Unfortunately, hotels generally have too many pre-defined segments, which leads to confusion about which is the right segment, and this, in turn, leads to poor data quality. The problem now is how to segment the changing corporate business. Here are some thoughts on what will happen to the most common corporate segments.

Non-contracted transient business travelers

The travel reason is business; the traveler needs accommodation, is not bound by corporate travel policies, and is, therefore, free to book any hotel in any channel. Hotels can guess if the guest is a business or leisure guest based on the day of the week, distribution channel, the number of guests in the room, and other variables. Still, there is no way a hotel will guess 100 percent right every time why the guest needs accommodation unless they ask the guest. Information about the guest is crucial since the Customer Lifetime Value (CLV) for a single guest could be substantial.
 
Business people in sales will probably travel as much as before the pandemic, while other roles will travel less. As a result, the total volume will be lower for a few years, but as the economy grows (if it does), this segment will also start to grow.

Contracted corporate transient business

Large corporations and organizations tend to sign agreements with hotels for accommodation. They need many room nights at the destination and would primarily want to negotiate a lower rate. A travel manager promises (estimates) how many room nights the company will buy during the following year. The hotel and the travel manager negotiate and agree on the rate and other terms. This segment is easy to identify based on the company name, a rate code, or a combination. This segment is seldom confused with leisure travel since the company rarely pays for leisure nights. It is vitally important to keep track of the agreed room nights in the contract and ensure that the company delivers what they have promised.
 
Large corporations will put a cap on future travel because of substantial cost savings and minimize the risk of consumer protests due to a lack of compliance with ESG rules. The typical traveler is a knowledge worker whose way of working has changed during the pandemic. There are no people to visit in the corporate office any longer since everyone is working from everywhere. Cost savings, climate change, and work from everywhere lead to a lower short-term volume of contracted corporate business that will be even lower in a few years. Still, the market is vast, so hotels should still sign agreements for transient corporate business to get their fair share of the market.

Corporate groups

Overnight meetings and groups have had a strong rebound. People had been working from home and began to feel too lonely and needed to be re-energized. A physical meeting is still a good way for team building and reinforcing company culture. The team must gather elsewhere regularly when people do not meet at the office as often as before. It looks like meetings will have another type of content geared towards getting to know each other and social gatherings. Even if these arrangements are not frequent, they will span several nights and include more dinners and activities.

Bleisure

The "Work from everywhere" concept makes it possible to mix business and leisure on the same trip. Work on Thursday and Friday, and stay over the weekend for some fun. Corporations tend to keep a tight grip on travel costs, so the traveler will probably pay for the leisure part of the bleisure themselves. A hotel can easily capture this information when the guests ask for two separate folios for their stay. Bleisure is probably also something hotels talk about at conferences but never pay attention to code in their PMS. Hence, the segment only exists in people's minds and not in reality. Nevertheless, the idea of bleisure travel has grown fast in percent from an almost nonexistent market share. The segment could become a large guest segment if hotels understand how to serve these guests - not just by changing the market segment code in the hotel PMS.