Still taking a one-size-fits-all approach to guest experiences? That might’ve worked in the past, but today’s hotel guests expect a personalized stay.
In fact, 71% of consumers want companies to offer personalized interactions, and 76% feel disappointed when they don’t, according to McKinsey & Company
Hotel market segmentation helps deliver the tailored experience guests crave. From booking a room to checking out, segmentation enables you to meet their needs at every stage.
After reading this guide, you’ll understand the fundamentals of hotel market segmentation and how the right technology can make this strategy a success.
Hotel market segmentation is the process of dividing your potential guests into distinct groups. But it goes beyond simple, demographic-based guest categorization and goes further into who is making up the markets you’d most like to reach.
Tools like hotel management software, property management software (PMS) and review sites contain valuable data on guest behavior, booking patterns, preferences and more. You can use them to gather data on:
Pro tip: When guests use Canary’s Mobile Checkout and rate your hotel highly, they’re instantly invited to share on Tripadvisor and Google, turning happy guests into segment-specific brand advocates.
When you understand exactly who books your property and why, you can tailor your services, pricing and marketing to match their needs.
Segmentation also presents an opportunity to upsell hotel guests with targeted offers they’re likely to be interested in, driving more revenue and enhancing their stay.
Here are five different market segments in the hotel industry:
These guests book at standard rates and bring consistent revenue throughout the year. This group includes direct leisure bookings, independent business travelers and online travel agency (OTA) reservations.
Potential upsell offers: Room upgrades, local experience packages and late checkout
This high-value segment is filled with corporate travelers. These guests typically stay midweek through negotiated corporate channels, expect consistent amenities and require business-focused services.
Potential upsell offers: Premium Wi-Fi and airport transportation services
Multi-room reservations — whether for corporate events, sports teams, wedding guests or tour groups — share booking patterns and service needs.
Potential upsell offers: Meeting space, catering packages and group transportation
This segment books through intermediaries like tour operators and travel agencies at pre-negotiated rates.
Potential upsell offers: Pre-booked meal packages and local attraction ticket bundles
Niche segments like government travelers, military personnel and VIP clients require tailored rates and service standards.
Potential upsell offers: Extended stay amenities packages, room upgrades and premium parking passes.
Knowing exactly who stays at your property (and why!) can transform your entire operation. Here's what successful segmentation delivers.
Your guests expect tech-forward, personalized service that matches their preferences.
Technology makes this personalization possible at scale, and it’s clear that guests want services that reflect our modern era — as evidenced by the fact that 53.6% of travelers desire contactless check-in and checkout, while 49.1% want contactless payment options.
When you identify what each segment prefers, you can deliver the right mix of digital and personal touches — like offering mobile keys to tech-savvy travelers while maintaining traditional check-in options for guests who prefer face-to-face interaction.
Companies that excel at personalization drive 40% more revenue, according to McKinsey & Company.
Smart technology lets you predict and act on guest preferences. For example, our Dynamic Upsells software lets you automatically offer highly targeted add-ons based on guest behavior. So, if a guest inquires about late checkout through your messaging system, they'll instantly receive an offer to purchase this as an add on if it’s available.
The system then remembers this preference, proactively offering late checkout during the guest’s next booking — turning a one-time purchase into repeated revenue.
When you understand your guests, you can create highly targeted marketing messages that drive them to action.
For example, you could send families deals on tickets to local, kid-focused attractions, while luxury guests receive champagne and private transfer offers.
There are a few challenges when it comes to segmenting your guests, but you can overcome them with the right strategies.
Ready to get started? Use these hotel market segmentation tips to better serve your guests and increase your revenue.
You'll need a solid tech stack to gather and analyze guest data across touchpoints. A robust system will include:
Once the data starts rolling in, refine your offerings to each segment’s preferences, such as in-room upgrades, romance packages, local attraction tickets and more.
Streamlining this is possible by implementing an AI-powered upselling tool that analyzes guest behavior patterns to present relevant offers when guests are likely to buy. Say a parent messages about pool hours — the system will know to offer a package with pool towels, kids' swim gear rental and cabana access. The guest can then accept and pay for this offer, all without needing assistance from your staff.
Some guests will plan months ahead and hunt for deals, while others book last-minute and value convenience over price. Implementing dynamic pricing gives you the chance to accommodate both of these types of travelers, and has the potential to increase your revenue by up to 8% per year. When you understand these patterns, you can optimize rates for each type of guest and maximize your revenue.
Segmentation allows you to send highly relevant information and offers that show each guest you understand who they are and can anticipate their needs. This includes everything from pre-arrival communication to feedback requests.
Regularly analyze your segmentation strategy's performance. Track key performance indicators, like revenue per available room (RevPAR) and average daily rate (ADR), for each segment and adjust as needed.
As illustrated, hotel market segmentation lets you impress guests at every touchpoint…and did we mention it also boosts revenue?
If you’re ready to take your hotel's market segmentation strategy to the next level, learn how Canary Technologies’ software can help you better understand and serve your guests.
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