Wondering how to map out the perfect hotel market segmentation strategy that keeps your hospitality business ahead of the curve? Your search ends here.

As markets continue to prioritize brands that cater to individual preferences the best, every business’s success depends on how well it offers personalized experiences to end-users. This is especially true in the global hospitality market – an industry where businesses strive to offer memorable stays for a diverse range of guests.

Imagine walking into a hotel that anticipates your needs, understands your unique desires and precisely caters to your individual preferences. Don’t be surprised, it’s not a trick of the light; it’s market segmentation at work. It’s true – hotels nowadays can better understand and cater to each customer group’s specific needs, simply by dividing their target audience into distinct groups based on common characteristics.

This informative blog delves into the world of hotel market segmentation strategy, exploring real-world tactics, methods and actionable tips to help connect hotels with their ideal guests. Continue reading to learn how to identify, analyze and reach your target market like a seasoned hotelier using our guide.


What Is Hotel Market Segmentation?

What’s the #1 secret to success in today’s competitive world of hotel marketing? A thorough understanding of your target audience. This is where market segmentation comes into play.

Hotels are increasingly using market segmentation to divide their target market into distinct groups with similar characteristics, needs and preferences. This way, hospitality businesses can tailor their marketing efforts to effectively reach and engage specific customer groups by understanding these segments.

By doing so, hotel properties can easily concentrate their resources on the most profitable segments, while also providing personalized experiences that resonate with their target audience. In other words, a well-planned hotel market segmentation strategy enables hotels to precisely and efficiently target specific customer groups, leading to increased profitability and customer satisfaction.


Benefits of Hotel Market Segmentation

In today’s competitive environment, effective market segmentation recognizes that not all guests have the same needs, preferences or budgets, and that a one-size-fits-all approach is no longer effective. That said, here are some key benefits of using hotel market segmentation:

  • Enhanced Guest Experience:
    By understanding the distinct characteristics and needs of various market segments, hotels can design personalized experiences that truly resonate with their guests. Whether catering to business travelers, families, luxury seekers or budget-conscious tourists, segmentation enables hotels to anticipate and meet specific needs, resulting in increased guest satisfaction and loyalty.
  • Targeted Marketing Efforts:
    With a hotel market segmentation strategy in action, businesses can focus their marketing efforts on the most relevant customer groups to pool in a higher return on investment. Hotels can tailor their advertising campaigns, promotional materials and messaging to resonate with the target audience by identifying the key demographics, preferences and behaviors of various segments. This focused approach increases the impact and success of marketing initiatives, causing increased brand awareness and customer acquisition.
  • Increased Occupancy and Revenue:
    When hoteliers understand their target segments to a T and cater to their specific needs, occupancy and revenue increase automatically. Hotels can attract and convert customers from various segments by creating targeted marketing campaigns and promotional offers. Furthermore, all the targeted up-selling and cross-selling opportunities it brings can also increase revenue per guest, benefiting the hotel’s bottom line. Read more about how up-selling benefits every hospitality business by clicking here.
  • Higher Competitive Advantage:
    In a crowded marketplace, a hotel market segmentation strategy gives your hotel a much-needed competitive advantage to thrive. By effectively identifying niche markets and underserved segments, hotels can position themselves as experts in catering to specific customer groups. By doing so, distinguishing yourself from competitors becomes easier, as does attracting a loyal customer base and building a solid brand reputation.


Identifying the Key Market Segments In The Hotel Industry

To effectively cater to the diverse needs and preferences of its customers, the hotel industry employs various market segmentations. Understanding these market segments allows hotels to tailor their offerings, marketing strategies and services to specific groups of guests. Let’s have a look –


  • Luxury Segment: Luxury hotels cater to affluent visitors who demand first-rate services, luxurious amenities and individualized experiences. These properties frequently include premium accommodations, gourmet dining options, spas and exclusive facilities to create a luxurious atmosphere.
  • Business Segment: This hotel market segmentation primarily refers to corporate travelers and professionals. They offer convenient locations, well-equipped meeting rooms, business centers, high-speed internet access and other amenities necessary for productive work and seamless connectivity.
  • Leisure Segment: Hotels targeting the leisure segment aim to attract vacationers, families and tourists. These properties emphasize recreational amenities such as pools, fitness centers, kids’ clubs and entertainment options. They also prioritize easy access to tourist attractions, beaches and recreational areas.
  • Budget Segment: Budget hotels provide affordable lodging options, catering to frugal travelers, backpackers and those seeking minimal amenities. These establishments are known for providing comfortable rooms, essential services and competitive pricing.
  • Boutique Segment: The distinctive, fashionable and frequently themed designs of boutique hotels serve as a defining feature. They attract hotel market segmentation guests who value individuality and exclusivity by providing a distinct ambiance, personalized services and intimate settings.
  • Resort Segment: Accommodations in resort areas are geared toward tourists looking for all-inclusive getaways. They are typically located in scenic or secluded areas and provide multiple recreational facilities such as golf courses, spas, water sports and many dining options.
  • Extended Stay Segment: Extended stay hotels are designed for guests who need to stay for an extended time, typically weeks or months. These properties offer spacious suites or apartment-style rooms with fully equipped kitchens, laundry facilities and other amenities that make longer stays more comfortable and convenient.
  • Eco-Friendly Segment: As environmental awareness has grown, eco-friendly or green hotels have emerged. These properties focus on environmentally friendly practices, energy efficiency, recycling programs and locally sourced materials. This hotel market segmentation group appeals to environmentally conscious travelers looking for environmentally friendly options.
  • Wellness Segment: Wellness hotels promote health, relaxation and rejuvenation. They have spas, fitness centers, yoga studios and healthy dining options. Guests who prioritize physical and mental well-being during their stay are drawn to these properties.
  • Family Segment: Hotels that cater to families offer amenities and services that meet the needs of both children and parents. These may include family-friendly room configurations, children’s play areas, kid’s clubs and babysitting services, ensuring that the entire family has a comfortable and enjoyable stay.


How To Create A Hotel Market Segmentation Strategy?

When it comes to better-targeting customers who share similar traits and needs, hotels must first segment their market and tailor their marketing efforts and services to effectively reach and cater to specific customer segments. That said, here are the key steps in developing a hotel market segmentation strategy –


Step 1: Market Research & Analysis

First things first, understanding the target market demographics is a must. This includes age, gender, income, education and occupation. Hoteliers can discern patterns and identify segments within the larger market by analyzing these data points.

Psychographic profiles go beyond demographic information to examine customers’ attitudes, values, lifestyles and motivations. These help hoteliers align their offerings with the desires and aspirations of their target segments. Besides, analysis of travel patterns by investigating factors such as travel frequency, travel purpose (business, leisure, or both), and preferred destinations also helps.

Potential hotel guests’ preferences and behaviors also provide valuable insights into their decision-making processes. This aspect of the hotel market segmentation includes learning about their preferred amenities, room types, dining options and recreational activities. Moreover, examining how they interact with technology, such as booking platforms and online reviews helps hotels adapt their digital strategies to meet customer expectations.


Step 2: Segment Identification & Evaluation

Segmentation involves assessing a diverse customer base and classifying it into distinct groups based on common characteristics such as demographics, psychographics, behavior and preferences. As explained above, these segments can range from business travelers and families to luxury-seeking tourists and budget-conscious folks.

Segment evaluation means assessing each segment’s potential based on critical factors such as size, growth potential, profitability, and compatibility with the hotel’s offerings. By prioritizing segments aligned with the hotel’s brand and revenue generation, the hotel can optimize marketing efforts and focus on promising opportunities.

Here’s what you must know about evaluating hotel market segmentation: size determines market opportunity, growth potential identifies emerging trends, profitability examines revenue and spending patterns and compatibility ensure personalized experiences and customer loyalty.


Step 3: Target Segment Selection & Positioning

How do hotels select their target segments and position themselves accordingly? Let’s take an example. Hotel ABC Resorts has selected two primary target audiences: business travelers and luxury vacationers. It positions itself as a sophisticated hub for business travelers with cutting-edge amenities and attentive service. Simultaneously, it positions itself as a haven of indulgence for luxury vacationers, offering luxurious accommodations and personalized attention to detail. This way, Hotel ABC Resorts aspire to be the preferred choice for both segments through strategic marketing and exceptional experiences, making it an integral part of hotel market segmentation strategies.

To learn about hotel pricing strategies to boost revenue in 2023, read this.


Step 4: Marketing Mix Development

Customizing the hotel’s marketing mix typically starts with meticulously designed rooms and amenities that cater to the segment’s personal needs. Setting appropriate pricing levels is also important. To determine pricing strategies that strike a balance between affordability and perceived value, hotels must carefully analyze the target segment’s budget constraints.

Hoteliers must also identify the channels that the segment uses the most frequently, and ensure their presence in those channels – be it online travel agencies, direct bookings or partnerships with travel agents. Finally, the hotel can develop compelling and personalized campaigns that highlight the segment’s unique features and benefits, ultimately driving awareness, interest and bookings.


Step 5: Promotional Campaigns

Being the ultimate step in a hotel market segmentation strategy, it involves creating compelling and tailored messages that speak to your target audience. To better capture their attention and generate interest, focus on addressing their needs, pain points and aspirations. Use digital advertising, social media, email marketing and partnerships with relevant influencers or organizations for maximum reach and engagement with your target audience.

Also, keep a close eye on the success of your market segmentation strategy. Collect customer feedback, track KPIs, and analyze data to gain insights into your audience’s preferences and behaviors. Use the data to adjust and align your marketing efforts with changing customer needs and market dynamics. 


Summing It Up

In short, understanding and implementing effective market segmentation strategies can benefit hoteliers by allowing them to reach their target audience while also increasing revenue. 


About InnQuest

At InnQuest, we understand the importance of the challenges faced by businesses in the hospitality industry. Our goal is not only to help manage your businesses more efficiently but also to provide ongoing support to engender growth and expansion. Book a demonstration of our award-winning hotel management software here.