Customizing Services through Market Segmentation

Maximizing your hotel marketing efforts is easier when you can identify and divide market segments. Segmentation allows you to understand customer needs, do personalized marketing, offer customized product offerings, and ultimately increase hotel revenue. Let’s explore market segmentation in hotel industry and provide effective strategies for creating personalized services.

---

List of Common Market Segmentation in Hotel Industry

Market segmentation in hotel industry involves dividing the broad hotel market into smaller segments, usually based on common characteristics. This approach allows your hotels to target different market segments with tailored marketing and service strategies, maximizing revenue, enhancing guest satisfaction, and ensuring competitive advantage.

Here are several market segmentation in hotel industry you need to know:

1. Demographic

Demographic segment groups are based on age, gender, income, or language. These hotel market segments will help you to identify trends, like which services different age groups prefer or which experiences appeal more to one gender.

2. Geographical

Geographical hotel market segments are based on where guests come from. Knowing your guests’ locations will help you target marketing efforts accordingly. These segments could be as broad as countries or drilled down to cities or specific regions within a country.

3. Behavioral

Behavioral segmentation is based on guests’ habits and actions. It includes repeat customers, those who give feedback, or guests who dine at the hotel. This will help you to understand trends and tailor services accordingly.

4. Transient

This market segment can be identified as travelers who are always on the move, and looking for short-term stays. They often include business travelers or digital nomads. Their needs are usually straightforward – a clean room, fair rates, and good service.

5. Group 

Group bookings involve selling blocks of rooms simultaneously. These can be negotiated at a discount and are crucial for weddings or business conferences. Local events like concerts also drive larger group bookings.

6. Wholesale

The wholesale market involves bulk room block purchases by groups like tour operators. These rooms are often sold at discounted rates to bands, TV crews, or touring entertainers.

7. Special Offers

Special offers include significant discounts, such as sales, loyalty program benefits, or event discounts. While some guests may visit only during offer periods, loyalty program members will likely return, offering a chance to earn repeat business.

8. Local Negotiated Rates

Local negotiated rates are agreed between hotels and local businesses. They foster customer loyalty and may attract additional guests or revenue from related services.

9. Corporate Negotiated Rates

Corporate negotiated rates are agreed upon between hotels and business travel planners. Hotels offer regular business to corporate travelers who seek short stays, good prices, and reliable Wi-Fi. These guests may also bring business functions or conferences to the hotel.

10. SMERF

SMERF segments stand for social, military, educational, religious, and fraternal groups. They include weddings, military conventions, and school sports teams. These segments provide steady business and can fill rooms during off-peak seasons.

How Market Segmentation Helps Your Hotel Create Personalized Services

Understanding market segmentation in hotel industry can help you create personalized services. It can also help identify different customer groups’ unique needs and preferences.

Market segmentation can be used to create marketing and service strategies that better meet each segment’s specific needs. It also can increase customer satisfaction, loyalty, and differentiation. 

Here are several ways market segmentation can help your hotel businesses create personalized services:

1. Understanding customer needs

Segmenting the market can help your hotel businesses identify the unique requirements of various customer groups. It can also make it easier to provide tailored products or services.

Key Benefits of Market Segmentation:

• Tailored Offerings: Easier to provide customized services or products that meet the specific needs of various customer segments.
• Customer Preferences: Understanding the distinct preferences of your segments can lead to more targeted and effective service offerings.

Examples of Customer Segmentation in Hotels:

• Dietary Needs: Some guests prefer vegetarian options, while others seek local cuisine experiences.
• Service Preferences: Differentiating service offerings, such as room customizations for business travelers versus leisure travelers.

2. Personalized marketing

Customer segmentation—by demographics, geography, or behavior—can transform a standard promotional campaign into a more personal invitation. Campaigns should speak directly to the unique needs and preferences of each customer group. 

In a survey conducted by Statista, 73% of participants expressed a desire for enhanced personalized digital services in 2023. Research also shows that emails with personalized subject lines have a 26% higher chance of being opened.

Now, picture this scenario: it’s a week before a former guest’s birthday. You send them a personalized email, not just with well-wishes but with a special birthday discount for their next stay. This simple, thoughtful gesture does more than just rekindle old memories—it weaves new threads into making a lasting relationship, encouraging a return visit and fostering a genuine connection.

By embracing such personalized engagements, your hotel doesn’t just send marketing messages; it starts meaningful conversations that your guests hear and appreciate.

3. Tailored pricing

Knowing the market segmentation in hotel industry helps you design special pricing plans. Sorting customers into different groups based on demographics, location, and behavior. This method let you understand what each group prefers and needs so you can offer prices that suit them best. 

Adjusting the prices for each group can make guests happier, keep them coming back, and increase overall revenue. Here are several different pricing strategies you can use to attract guests:

• Dynamic Pricing: Changing prices based on demand, like raising them when more people want to book.
• Value-Based Pricing: Prices are set based on what guests think the room is worth, considering the hotel’s location and offerings.
• Competitive Pricing: Pricing rooms competitively compared to other hotels nearby to get more guests.
• Last-Minute Sales: Discounts are given for rooms still empty at the last minute, even if most rooms are already booked.
• Promotional Pricing: Offering special low rates during slow times to get more guests.
• Length-of-Stay Pricing: Prices are adjusted based on how long someone stays, with lower prices for longer stays and higher prices for shorter ones.

4. Personalized product offerings

Understanding the preferences of different customer segments allows you to create customized products and services. It can make customers happier and more loyal. In the end, your hotel can increase your income. Here are several examples of personalized products and services in the hotel industry include:

• Personalized Amenities: Guests can choose their preferred amenities, like toiletries or bedding, for a more comfortable stay.
• Tailored Services: Services are customized based on guest preferences, such as dietary options or room service.
• Personalized Recommendations: Guests receive recommendations for dining or activities based on their interests and past stays.
• Loyalty Programs: Repeat guests can enjoy personalized benefits like room upgrades or late check-out.
• Personalized Communication: Guests receive personalized recommendations and services through messaging apps.
• Hyper-Personalization: Technology enables one-to-one interactions with guests, offering special promotions based on their preferences.

Read also: Revolutionizing Hotel Bookings in 2024: 12 Steps to Increasing Direct Bookings

Conclusion 

Market segmentation is an important marketing strategy in the hotel industry to understand your guests better. By dividing the big market into smaller groups based on age, location, and behavior, you can offer customized or personalized services based on each guest’s unique requirements. Market segmentation in hotel industry will help you increase revenue through smart marketing and offer guests exactly what they need. The key is to make guests feel special and ensure that every aspect of their stay is perfect. By doing this, hotels can keep guests happy, establish strong relationships, and stand out in the industry.

Frequently Asked Questions

---

Explore the power of market segmentation in hotel industry with SATUVISION‘s Hospitality Digital Strategy. Tailor your services to meet the unique needs of different customer segments and elevate your hotel’s performance. Discover how market segmentation can revolutionize your approach to guest satisfaction and business success.