As outlined in the recently published book The Evolving Dynamics of Revenue Management, “Proper market segmentation allows a hotel to price and apply inventory controls in order to maximize revenue from various lines of business. In order to be as successful as possible, hotel management must ensure that they use the most logical method possible for tracking their business.”
|
Miguel Solis |
Hospitality market segments can focus on three key areas: product, pricing, and distribution. Many hospitality sales and marketing executives spend countless hours and cumulatively millions of dollars defining their respective market segments. Once defined, these same executives focus their sales and marketing efforts to mine customers from those segments. Revenue managers, on the other hand, use segmentation to deliver a more profitable customer through focused product, pricing and distribution, and to ensure proper reporting and tracking. The need for market segmentation is more prominent in the hospitality industry now because of the rapid changes in customer needs and the vast amount of product offerings. With the lines blurring in respect to amenities and specific market offerings, segmentation is a more complicated issue.
Understanding some basic concepts will allow your hospitality operation to become more focused with attainable goals and measurable results. Your market segments can be evaluated using the following criteria:
- Segments must be identifiable so they can be measured. Identifying a segment also will allow for greater reporting and more accurate tracking. Results will help in future decision making.
- Segments must be accessible by communications and distribution channels. Evaluating a segment that is accessible will allow more flexibility in marketing budgets and cost of sales efforts.
- Segments must be substantial so as to be profitable and justify the resources required to obtain and maintain them.
- Segments must be durable to maintain stability of cost and impact to profits.
One facet of market segmentation in the hotel industry is the unique consumer segment. The idea of a unique consumer segment is relatively new in the industry but may yield significant results. By identifying a unique consumer segment, a hotel can focus on and penetrate a non-traditional market. Project business can come in many forms and does not necessarily fit neatly into a traditional market segment. As long as the segments meet the above criteria, it can become the basis on which targeted marketing and revenue management can prosper.
Establish the foundation for segmentation in the unique consumer market by using the following categories:
- Geographic—region, size, population and climate.
- Demographic—age, gender, lifestyle, income and occupation.
- Psychographic—activities, social interest and values.
- Behavioral—features, benefits, usage, loyalty and occasion.
Unique consumer segments can be vastly different. Take the time to ensure the specific consumer you are reaching is one that is matched most closely to your specific offering. Matching that customer will ensure more profitability and less effort. Retaining that customer may take constant review of your product and pricing as it relates to your competition.
Corporate market segmentation
Establishing the basis of segmentation in the corporate market utilizes some similar components as the unique consumer market, but may have vast differences in the process involved in obtaining that specific account. Here are a few areas to focus on:
- Location or cluster of industry.
- Corporate type, size, industry, purchasing criteria.
- Behavioral characteristics, usage, buying status.
Keep in mind corporate markets will take greater effort to obtain and maintain. Obtaining that customer will take longer as there may be more requirements or additional decision makers to whom you must present. Keeping that target corporate customer will take additional expense that will be far less than the expense to gain or regain that account.
Other markets can be defined using the same components with differing sub-components or variables specific to that market. Understanding your customer segments to satisfy their needs will help you stand out among the competition and potentially create a specific niche market to target along with more efficiently using marketing resources.
Once your marketing segmentation is in place, the real work begins. Sales and marketing can begin to plan a targeted campaign for each segment along with creative sales efforts to engage the customer in the product, services and specific amenities you have to offer. Utilize all the current methods of marketing strategies in today’s electronic world to reach that segment. Ensure return on investment is measured while calculating the proposed marketing expense. And follow up each marketing year to fine tune the segmentation to ensure the customer criteria used in the past has not changed.
Revenue management, on the other hand, can go about utilizing distribution channels targeted at customers in specific segments, ensuring the proper product description and pricing is in place while allowing for proper tracking and reporting.
Want to Learn More?
Topics like this one are being addressed as part of the 10-part Revenue Management Webinar Series produced by the HSMAI University, HotelNewsNow, and STR. Begun in February 2010, and going through December, each month a webinar will cover various aspects of cutting edge revenue management in today's economy in conjunction with articles written by members of the HSMAI Revenue Management Advisory Board. If you’re not able to attend a live program or the date has passed, archives are available.
Miguel Solis, an international hotelier from Latin America, has fourteen years experience in the hospitality industry with Bass Hotels and Resorts, Radisson Hotels Worldwide and Choice Hotels international. He also has twelve years in-depth experience with international commerce.
The opinions expressed in this column do not necessarily reflect the opinions of HotelNewsNow.com or its parent company, Smith Travel Research and its affiliated companies. Columnists published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.