The Importance of Market Segments

Oct 22, 2021 | Revenue Management

According to Wikipedia, Market Segmentation is the activity of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers (known as segments) based on some type of shared characteristics.

Some Hoteliers continue to focus solely on their overall room revenue, however there are huge advantages to moving away from this format and homing in on individual market segments. A detailed analysis of the growth or decline in your market segments for a specific period will reap huge rewards for the properties who are implementing such a strategy. Ensuring you’re getting the most from each customer type will increase your overall performance.

 

 

In order for this to be effective and useful though you need to make sure that you don’t have market segments in your PMS for the sake of it! There is no “one size fits all” solution when it comes to Market Segments as each property is different, and the number and type of market segments you have depends on your location and your business mix. Each property should review their business mix and set up their segments accordingly. Ideally, we would recommend no more than 15 segments for any property – if in doubt adhere to the KISS principle; Keep It Simple, Stupid!

Core Customer Types

In essence, there are two core customer types – Corporate and Leisure guests. In order to analyse these segments correctly you can break them down further depending on your business mix.

For a business hotel here are some examples:

⦁ Local Negotiated Corporate Guests (LNR) – guests who are working for a company who have a preferred rate with your hotel

⦁ Transient Corporate Guests – guests who don’t stay with you frequently and don’t have a negotiated rate and avail of your BAR (Best Available Rate) or your public corporate rate

⦁ Residential Corporate Guests – guests attending a meeting in your hotel and are staying overnight

Similarly, if you’re a property that has a lot of leisure guests, this can be broken down in a number of ways as well. Some examples are:

⦁ Midweek and Weekend Leisure

⦁ Wedding segment

⦁ Promotional rates segment – to track special offers

There are also properties who work with tour operators and might decide to break their segments into Tour Series, Ad Hoc Tours and FIT business.

 

 

Tracking Market Segments

Tracking and monitoring of market segments has come to the fore in recent times because with good tracking you can understand better why business has increased or declined. A rise or fall in revenue or in ADR can be pinpointed to a specific segment much easier and you can act on this information much quicker. In busy times you can quickly identify who is bringing in low ADR’s and you might decide to restrict this business type and in lieu of this take business from higher yielding segments which will increase overall ADR and RevPAR.

With good analysis things that are out of your control i.e., one off events such as conferences and concerts in your area or property can be quickly identified. It can also point to more subtle changes that may have previously gone undetected such as a change in the terms of a GDS contract or a change to a family or spa package which is affecting those particular segments either positively or negatively.

Proper analysis of your market segments will help with forecasting and make the budgeting process much easier.

At Rate Wise we have a Business Analytics tool that helps you analyse your market segments quickly and pinpoint problem areas into the future.

Our software can provide a breakdown of market segments by day so you can efficiently analyse your performance year on year without having to generate and print reports from your PMS. This allows you the time to properly review your figures and make quicker, better informed decisions using data from your PMS that has been presented in an easy to read and easy to understand format.

If you would be interested in learning more about our Business Analytics and Pick Up tools or any aspect of our software, please contact Liz at [email protected] or on +3531 6391155 to set up a demo.