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Market segmentation to tailor your offer

Market segmentation to tailor your offer

One thing that every entrepreneur in the hotel sector must bear in mind is that he will not be able to attract all customers in the market to his business. Customers are different from each other and have different behaviours. Therefore, independent hotels, as well as non-independent hotels, should segment the market. This will help […]

One thing that every entrepreneur in the hotel sector must bear in mind is that he will not be able to attract all customers in the market to his business. Customers are different from each other and have different behaviours. Therefore, independent hotels, as well as non-independent hotels, should segment the market. This will help them to better establish marketing strategies.

In this sense, most hotels focus on one or several market segments, and develop their products or services based on that or those particular segments.

Market segmentation, then, is the process of dividing the market into smaller groups, which still continue to exhibit distinct characteristics and behaviours, thus demanding the application of a more digitally focused marketing mix. So, for any marketing process, segmentation according to experts is the first step.

When you manage to segment your market, you will not only have more clarity to apply marketing strategies, but you will also have a better understanding of the types of travellers or customers staying at your hotel. This allows you to tailor other things such as rates and services that will meet the needs of the consumer. In this way you will be able to increase revenue.

 

Main market segments

Market segmentation is a fairly broad process, as it can be divided according to factors such as geography, demographics and behaviour. In this case we will consider 5 segments that can implicitly carry the above variables:

 

Individual

This segment refers to those customers or guests who are not associated with any company or group. And, generally, this type of segment is looking for the best rates.

 

Temporary

This market segment refers mainly to customers travelling for business or leisure. The behaviour of this group is expressed in that they generally book directly with the hotel or through online travel agencies (OTA’s).

 

Corporate

This corporate segment is made up of customers who travel on business. In most cases the company they work for has a certain partnership or agreement with the hotel. In these agreements the hotel’s sales department requires a certain number of overnight stays in exchange for flexible rates and additional services.

 

Groups

In this case we refer to those clients who travel in groups. They usually book several rooms in advance. Groups can vary in number, but are generally distributed between 6 and 10 rooms per night.

 

Wholesalers

This is a market segment where travellers book through an intermediary. This intermediary can be a tour operator or travel agency, which negotiates with the hotel. On the other hand, wholesale guests travel for leisure and pleasure.

 

Other

This segment is used for those customers or travellers who do not fit into the above segments. An example is those customers who travel for political or military reasons.

 

Advantages of hotel segmentation

Carrying out market segmentation is a key part of the marketing process of your independent hotel, as segmentation brings with it the following favourable elements:

  • Segmentation helps the hotel to better understand the tastes, preferences and needs of customers. This is key to offering personalised services and improving the customer experience.
  • It identifies those market segments that can be more profitable and to which the hotel’s profile is best suited.
  • It helps to identify the segments that are a priority. Since there are a huge number of segments, it is necessary to target those with the greatest buying potential.
  • It facilitates the analysis of our competitors, which segments they target, what actions they carry out on them, in order to be able to act and make decisions accordingly.
  • It allows you to direct hotel marketing towards your ideal guest or towards several segments at the same time. For example, if one market segment does not travel in a certain season, the hotel can target another market that does. This increases the chances of bookings.
  • It increases revenue and improves profitability. Market segmentation allows you to see where demand from various segments will be highest. This in turn allows you to design strategies to increase occupancy and rates.
  • You save on operating costs. When you segment the market you can better determine how the market will behave. This in turn allows hotels to better organise themselves with regard to operational processes. An example would be to prepare for the food and beverage area, i.e. to buy the right food to avoid excesses.

 

How to identify your target market

When evaluating our target market, it is necessary to take into account aspects such as the size and growth of the segments, the attractiveness and objectives of each one and the resources available to our hotel establishment.

First of all, the hotel must carry out an analysis of the data on sales made to segments and from there see what the growth rate is and the profitability it generates. This makes it possible to see the segments with the largest size and those that are growing the most. However, care must be taken as small hotels may not have the resources or skills to cater to the largest and fastest growing groups. It is best to target groups that are more profitable, but not as large.

Secondly, given the above, a cluster may have adequate growth rates, but does not offer attractive advantages for an accommodation. For example, high competition in a certain segment, such as corporate, may be unattractive. On the other hand, there is the purchasing power of customers, which can also affect attractiveness. For example, if a certain segment such as wholesalers need 30 rooms, they will try to negotiate a low rate. In this case, those larger hotels that have greater capacity to provide the service will be able to lower prices and better control the segment. But this may not be the reality for other types of hotels, which need to set certain rates to maintain their operability.

Finally, the objectives and resources of the hotel must be taken into account. Some segments may be very attractive, but do not fit our objectives from an economic, social or environmental point of view. For example, the corporate segment tends to be very demanding in terms of luxury services and more recently in terms of environmentally friendly practices. So if a hotel does not have the capacity to offer facilities that meet those needs, it should not choose that segment. It is better to enter one where it can satisfy the needs and gain competitive advantages.

When determining the most suitable market segments for your hotel, it is best to seek the advice of a specialised hotel consultancy such as IHCS, so that you can get the best possible results, tailored to your hotel.

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