Understanding Hotel Market Segmentation

What is hotel market segmentation?

Hotel market segmentation is the process of dividing up the guest market and identifying two or more groups that you will focus on at your hotel property. For example, if your hotel is located in a destination that attracts guests of all ages and stages, you need to evaluate and analyse the types of guests that book rooms at your property.

If you find that your guests are predominantly families with young children and multi-generational families booking large group trips, then those are the two market segments that you need to focus on in your accommodation distribution strategy.

This allows you to invest your resources wisely and use the marketing tools you have available to drive direct bookings.

Why is market segmentation important in the hotel industry?

Hotels generally attract a diverse range of guests — such as solo travellers, families, seniors, group travellers, and more.

While some hotels may cater more to the millennial generation another hotel may focus solely on luxury travellers who won’t spare a dime on their adventure. It’s important to recognise all hotels have guest segments that should be identified.

Segmenting your target audiences helps you to better understand who is driving your bookings, and also allows you to use marketing promotions in order to increase direct bookings.

By giving you a clearer picture of who your hotel’s target market is, guest segmentation focuses your efforts – everything from marketing to developing the best guest experience is easier when you have a deep understanding of the segment you’re aiming to attract.

Different market segments in the hotel industry

To gain a better understanding of the different market segments in the hotel industry, let’s take a look at some hotel market segments examples. A few of the more common hotel market segments include:

Transient

The transient segment is the most popular type of traveller that hotels target. These guests are individuals who might be travelling for business or pleasure, and who book through OTAs, travel agents or direct with hotels at non-negotiated rates.

Corporate negotiated

A corporate traveller whose business has an account (including negotiated discounts) with your hotel will fit into the ‘corporate negotiated’ hotel sales market segment. Discounts are usually only activated if a minimum number of nights are booked over a given period.

Wholesale

Wholesalers negotiate special rates with a hotel that they then resell to third-party OTAs, travel agencies and tour companies. Ultimately these rooms are sold to travellers, whether tour group guests or “free independent travellers” (FITs).

Group

The group segment generally encompasses guests who are travelling as part of any sort of group (tours, corporates, organisations, religious groups, etc), and who therefore gain access to a bulk discount.

Other

Our final market segmentation hotel example is ‘other’, which includes any guest that doesn’t fit neatly into the hotel target market segments listed above. Examples might include diplomats and military personnel.

How to get started with hotel market segmentation online

Now that we understand the basic shape that the target customer of a hotel might take, the next question is how to go about finding yours. Here are a few tips you can use in order to identify the target audience at your hotel:

Expand and analyse your digital presence

Improve your presence on social media and make sure that you are on the most popular online review sites. Your guests will leave feedback that will help you better understand who prefers to stay at your hotel, and who is looking for a different type of experience.

Gain insight from your current guests

Conduct exit surveys in order to better understand who your guests are and why they chose your property. You can send these surveys in an automatic e-mail during the check-out process.

Check the hard numbers

Use online metrics in order to track your site visitors and your conversions. Programs such as Google Analytics can give you detailed insight into the guests who are booking your rooms.

How to target the right hotel market segments

When it comes to developing a marketing strategy and promoting your B&B to prospective guests, you need to know who your target market segments are. Your distribution strategy should be designed to attract the most motivated guests across the globe, specifically those that are most interested in staying at a B&B in your destination.

Here’s how you can be sure that you are targeting the correct geographic markets:

1. Use a Channel Manager to Create Effective Distribution Partnerships

Without a channel manager, you are forced to try to create connections with powerful OTAs on your own and then manually input any bookings generated through those channels. It’s nearly impossible to do unless you automate the process with an effective channel manager. 

With the right channel manager, you will be able to connect with as many OTAs and other travel agents as you want. Your bookings will be automatically entered into your property management system, eliminating the risk of overbooking.

2. Focus on OTAs that Reach Your Target Geographic Markets

Whether your B&B attracts domestic guests or international travellers, it’s important to connect with the OTAs that focus on those specific geographic markets

 While there are many generic OTAs available that reach a global audience, it’s the OTAs that are widely used by a specific geographic market that will generate the most bookings for you.

For example, China is one of the most powerful inbound tourism markets in the world, so any B&B operator hoping to increase their bookings among Chinese travellers should use their channel manager to connect with OTAs like Ctrip.

3. Monitor The Results Of Your Distribution Strategy

As you receive bookings from new guests and across your different channels, you will want to use the reporting features on your property management system to evaluate your progress. You should generate reports that use live data to give you the most accurate results.

In addition, you should be able to filter your reports and create documents that highlight which geographic markets are booking rooms at your property. This will help you identify which geographic markets to pursue.

4. Use Relevant Data To Target Motivated Guests

The data that you generate through your reports as well as your website analytics should be used when creating your marketing strategies. Whether you are launching a new social media campaign or an online advertising campaign, you will want to invest your resources where you will achieve the best results.

Understanding the types of guests who book with you and knowing where they come from will help you create effective marketing campaigns that drive direct bookings.

How to perfect hotel market segmentation for your small property

Every B&B operator wants to maximise their bookings, because this is the best way to enhance brand recognition and earn more revenue. The key to increasing bookings on a regular basis is to identify a target market for your property and learn how to attract that market.

Here are a few tips to help you identify the perfect market for your B&B:

1. Implement a distribution strategy and track the results

The first step in identifying the right market for your B&B is to discover who is booking rooms at your property. Begin by creating and implementing a distribution strategy aimed at a global audience.

Partner with OTAs, retail travel agents and other distribution partners so that you can reach a wide range of potential guests. Once your distribution strategy is in place, be sure to track the results and analyse the data that you receive.

This should give you insight into the people who stay with you most frequently. Take note of their age range, their gender, their traveller status, their destination of origin and more.

2. Send out surveys to get more information about the guest experience

After a guest has checked out from your property, send them a post-stay survey to garner more insight into how their stay went and if they would recommend your property to a friend. Ask them questions about the purpose of their trip or why they chose to stay at your B&B, and invite them to offer feedback that will help you improve the guest experience for others.

Monitor all results, and continue to tailor the guest experience to meet the needs and expectations of your target market segment.

3. Solicit and monitor online feedback

Encourage your guests to leave feedback online. Some of the most popular portals for online feedback include Facebook and TripAdvisor. By establishing a presence on these social sites, your target market will begin to trust your brand. Third party feedback is considered to be extremely valuable among prospective guests.

Of course, you need to monitor the feedback that you receive and respond to reviewers when necessary. Take note of negative feedback, and attempt to improve the guest experience at your B&B based on the comments that are left on these review pages.

4. Use data to create a customer profile

By utilising an online booking system that collects valuable data, you will be able to easily build a customer profile for your brand. This customer profile should describe the average guest who stays with you.

Through data collection, you will be able to discover whether it’s Millennials or Baby Boomers who most often book your rooms, or whether you attract more business or leisure guests. With an accurate customer profile available, you will be able to fine tune your marketing and promotional campaigns.

Once you have identified your target market segment, you can begin creating a marketing strategy and distribution plan aimed at this specific audience. It will help you develop trust among your target market segment and ultimately increase the bookings at your B&B.

5. Provide packages and promotions for guest segmentations

Once you know who your guests are and have identified the traveller segments that you are going to focus on, you can create packages and promotions that drive direct bookings. For example, if many of your guests are independent travellers between the ages of 20 and 30, you may want to offer adventure tour packages that guests can select at the time of their booking.

You also could schedule events designed to allow your guests to meet and greet with other solo travellers staying at your property.