The importance of a quantifiable market segment contribution

In the hotel industry, market segment is one of the important subjects especially for sales, marketing and revenue department.  Market segment will be part of the discussion during regular revenue meeting, monthly and quarterly strategic meeting as well as part of yearly business plan development.

Good understanding on market segment will help sales and revenue team to focus on which segment to target and chase.  This will lead into developing an aggressive and yet an achievable sales target as part of sales KPI.  Do note that the changes in market environment will require the hotel to be dynamic in targeting the market segment.

Here, I will refer to room market segment whereby room accommodation becomes one of the significant revenue contributions in a hotel.

Not only exploring on range of room market segment but also on how to estimate the percentage contribution of each segment to provide the best possible result.

In the hotel industry, you can consider to categorize the room market segment as the following,

• Transient segment – This will refer to guests who stay at the hotel and are not linked into any company or any groups.
• Corporate segment – These are guests who are booked by a company and stay at an agreed company rate
• Government segment – This will refer to guests who are booked by a government bureau and stay at an agreed government rate
• Group segment – Group can be classified as above 10 rooms staying at the same periods of time. If it will involve large number of rooms, then, there will usually be an event organizer or a professional convention organizer who handle the booking in which at the same time, it will link into some event either in the same or different location.
• Leisure segment – These are guests who stay at the hotel at leisure purposes such as on weekend, holiday season and are booked directly by the guest.
• 3^rd party segment – This will refer to guests who are booked by 3^rd party, so the hotel will identify from where the bookings are generated

Do note that the naming of each market segment can differ from one hotel to another depending on the hotel standard and how each hotel aims to focus on.

From the mentioned market segment, in order to help in analyzing the most potential segment, then, you can also consider to break down into sub-segment such as,

• Transient segment
  • Individual transient
  • Group transient
• Corporate segment
  • Individual traveler
  • Group corporate
• Government segment
  • Individual traveler
  • Group government
• Group segment
  • MICE
  • Room only
• Leisure segment
  • Leisure individual
  • Leisure group
• 3^rd party segment
  • Travel Agent
  • Tour Operator
  • Wholesaler
  • OTA
  • GDS

Of course, there are another way to create room market segment depending on the hotel type and requirements. So, be flexible and be dynamic to adapt to the market situation.

What’s next after discussing market segment category?  Not only to understand the breakdown of room market segment, but also to identify the different percentage contribution of each segment to suit your hotel needs. This can be calculated by room night or by room revenue.  Do consider the following questions when doing the market segment mix contribution analysis,

• Where is your hotel is located? Is it in the city center, in resort destination, in an isolated yet interesting area, within proximity to and from the airport, nearby large convention hall, nearby MNC and embassies or consulate?
• Are there many hotels in your city, regardless the star rating?
• Does the city have several interesting tourist and entertainment district?
• How about checking the yearly calendar of event in your city? Any upcoming big event, conferences or exhibition?
• How about the hotel facilities and services?
  • Does your hotel have large or small number of room inventory?
  • Does your hotel have spacious ballroom and many breakout rooms?
  • Does your hotel have leisure facilities for children?
  • Does your hotel have selection of restaurant and outdoor facilities?
  • How about car parking area, is it sufficient to accommodate large number of cars as well as buses?
  • Does your hotel invest in the system to support generating certain source of market?
• How about the hotel’s rate structure, is it dynamic or static?

By analyzing some of the mentioned questions, the hotel is able to estimate the reasonable and aggressive numbers to generate per each market segment to support sales strategy. Sales person can then focus on which market segment to chase and capture.  Market segment mix contribution will be created as part of the business plan development. Afterwards, based on the current market situation, the percentage contribution of each market segment will be regularly reviewed and adjusted if necessary, during strategic meeting discussion as well as during reforecasting periods.

For example, group segment will have larger percentage compared to other segment in the month of June since there will be a big conference which lead to high city occupancy.  Early in the year, you find out that the conference is cancelled.  Do you still keep the same figures in group segment or revise the figures and switch the focus to another segment which is more potential?

Hence, market segment mix contribution needs to be dynamic and adaptable to the changes of market situation. This is to be able to develop effective strategies so that sales person can be better focus and generate good result as expected.

Wishing you all the best.