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Profound Insights of Market Segmentation

Not all customers are the same. Although, of course, all guests must receive the same high standard of service at a hotel or other kind of facility within the Hospitality Sector, there are definitely different types of customers. In this article I will help you list the key market segments identifiable for your hotel's BCG matrix and ask yourself the following questions to help you prioritise and make the right choices: And offering them a hospitality experience that entirely meets their particular type and exact needs is the key to a providing an enjoyable hotel stay, where satisfaction is virtually guaranteed.


How can this differentiation in customer types be best organized? The answer is to devise a system of segments, known in Hospitality as Market Segments.



Transient Direct -

A hotel usually has different BAR (Best Available Rate) levels, which are non-restricted and available to all customers. Guests booking these rates don’t have access to qualified rates (contracted rates). BAR rates are highly dynamic and are usually changed very frequently. Many other rates, such as non-refundable promotions, are derived from BAR (% off BAR).  

BAR Website - Best Available Rate sold through the website.

BAR Direct - Best Available Rate sold direct by phone, email, fax.

Advantage -

Customers who book directly through your website, Call are more likely to become a returning guest. When they have taken a closer look at your website, they will get the feel of the ambiance of your hotel and brand. You can offer them specials by means of a loyalty program. And have special advantages such as priority check-in and check-out times and they can earn points for every stay which they can trade for special offers such as an extra night stay, a discount or a special offer. Since you also have your customers’ data now, you can contact them and target them with campaigns for returning visitors.

Transient OTA -

Transient guests are individuals or families that may be traveling for business or leisure booking hotel through online travel Agents. Travel shopping via online agencies has become very popular nowadays. OTAs websites allow consumers to book various travel related services directly via Internet.

BAR Indirect Commissionable - Best Available Rate sold through commissionable online travel agencies

BAR Indirect Net - Best Available Rate sold through net rate online travel agencies

Advantages-

· It’s a low cost way to list your property and its rooms.

· Reductions in your online marketing spend. OTAs will invest in marketing and advertising to attract potential international customers.

· A reduction in your website costs. OTAs are keen to provide a positive online experience for customers through good website design and functionality.

· Online travel sites are popular with customers who like to compare accommodation costs and the services offered by individual providers.

· Impartial reviews on online travel sites may give new customers the confidence to book.

Corporate/ Negotiated-

Negotiated rates are restricted rates, agreed upon between the hotel and a company or government. While BAR is available to all customers, negotiated rates can only be booked by guests who qualify for that rate. That’s why negotiated rates are often referred to as “qualified” business. Negotiated rates are only available for a limited period of time and need to be re-negotiated continuously. It is common practice that the more volume an account produces, the lower the negotiated rate. Last Room Availability (LRA) also plays an important role within this market segment. LRA means that the partner has the right to book the last available room at the hotel at their contracted rate, regardless of the current hotel BAR level. 

Advantages -

· Helps you in getting business in low seasons.

· Apart from room revenue, corporate guest increase the Food & Beverages revenue.

· We can enrol them for our loyalty programmed, so they can enjoy the benefits in other brand properties as well.

Groups -

Group pricing has to be defined ad-hoc and is highly dependent on high and low demand periods. They are often derived from BAR. Group business in general tends to have longer lead times and stricter cancellation policies to control group wash. Depending on the size of the hotel, group business can be used to build an on-the-books base for dates far into the future. 

These are just some of the types of groups who could qualify for Group Rate at hotels         

· Wedding parties

· Associations

· Business groups

· Conferences

· Corporate event               

Advantages-

· Our brand recall and equity will be very high. 

· It affects the profitability.

· Customer retention.

· Helps you in getting business in low seasons.

· Apart from room revenue, group increases the Food and beverages revenue including the space revenue.

Wholesale-

A Wholesaler is a 3rd party organization that sells hotel room nights. Wholesalers are companies that buy rooms in bulk then sell them to travel agents and OTAs, allowing hotels to generate more sales. Wholesalers are operating in the B2B segment, meaning they do not sell directly to the public but to other 3rd party sites and distribution channels.

Advantage-

· They are specialized in provide access to a wide range of markets that you might not be able to reach directly.

· Working with them is kind of a ‘free marketing’ for you. 

· Wholesaler contracts let you forecastoccupancy patterns and you are able to generate volume business.

These guest segments have common behaviors or needs, and respond similarly to marketing tactics. It is impossible to forecast demand or examine data without first breaking down the business into customer groups. Managers must understand that different segments of the business have different acquisition costs, behaviours  and levels of profitability.


By identifying customer groups that behave similarly, and assessing their value, revenue managers can determine how various lines of business contribute to their bookings and profit. They can then develop strategies to balance these segments in order to achieve the optimal mix of business for their hotel.Hotel and Revenue Manager should focus on below Market Segment factors while doing Budgeting, Forecasting.


To understand the real cost of distribution, which should include all marketing related expenses, fixed transaction fees as well as dynamic and fixed commission, you might want to re-think your segmentation. To make the right tactical and strategic decisions, you need proper data – per segment and/or segment category. Only then you can start to optimize profits. 

Wrong or outdated segmentation can be a curse. Take your time, re-think your current segmentation, and once you have defined it properly, you will see that the curse transforms itself into a blessing. A blessing in the form of profit optimization! 

Regardless of market segments, data accuracy is of utmost importance. Assigning reservations to the correct markets is crucial for Demand Management to work properly. With today’s CRS – PMS integrations (how Central Reservations Systems communicate with Property Management Systems) most segment assignments are automated. A proper setup and mapping in all related systems is required and segmentation should be kept as simple as possible to minimize the risk of (human) error.  

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