Hotel Market Segmentation

Hotel Market Segmentation

  • Posted by: Revenue by HRM


In previous weeks we have looked at the hotel revenue holistically, which was suitable for comparison and benchmarking purposes. To gain a better understanding of where the business is coming from, the hotel needs to further segment its business.


Segmentation is a process where the hotel groups customers based on their travel behaviours. The main market segmentations are Transient, Corporate, Group, Wholesale and Other which groups the customers based on their common characteristics. These five segments give very little information for the revenue manager to act upon, so further segmentation is required.

Channel segmentation groups the customers based on the channels they used for their bookings. Direct, Website, OTAs and GDS are the most used segments. This helps to further analyse the booking behaviour of the customers and identify booking patterns.

The key to segmentation is to use the appropriate number and type of segments for your property. There is no point in creating a segment if only a few bookings come through each year, as it will not show patterns and will not give enough actionable information. Also, grouping together a large number of bookings, which could be separated into different segments, limits the information needed to manage the segment.


Depending on the size of the hotel, location and the offerings, the number of segments used can be vastly different. The flowing segmentation is appropriate for a midsized Hotel with Spa and Golf facilities.


  • Direct: This includes full priced bookings the hotel receives direct, like through own website, walk-in, phone calls, etc.
  • Advance Purchase: All discounted advanced purchase bookings can be included in this segment. Depending on the size of the segment, it can be further segmented into Direct and Third Party Advance Purchase segments.
  • Third Party: This segment includes all full priced bookings received through OTA (Online Travel Agent) channels, like, Expedia, etc.
  • Local Corporate: All bookings from companies which negotiated rates directly with the property will be included in this segment. This can be further segmented based on whether they have LRA (last room availability) or not if it is appropriate for your hotel.
  • National Corporate: KNR (Key Negotiated Rates) bookings belong to this segment together with corporate bookings received through the GDS channel
  • Conference and Events: Bedroom bookings linked to on-site conferences and events assigned to this segment. For hotels with large conference and event facilities this can be split into two segments as booking behaviours can differ.
  • Wedding: This segment includes all wedding guest bookings
  • Package: Any package deal bookings are assigned to this segment. For hotels with Spa, Golf, or other main selling points, it is recommended to separate these into individual segments.
  • Group: This segment can include all group bookings (10 or more rooms). For larger properties, it is recommended to further segment these bookings into, Leisure Group, Corporate Group, etc.
  • Tour: Bookings received through Group Travel Agents are assigned to this segment
  • Wholesale: Bedrooms sold to wholesales travel agents, like Hotelbeds have a separate segment as these are usually much lower rated bookings.
  • Tactical: Voucher deals and other cheap rated bookings, which used to fill trot periods also cheap rated and segmented independently
  • Promotional: This segment is used by hotels with robust Marketing Strategy to measure the success of the campaigns and monitor booking patterns
  • Other: Any other bookings assigned to this segment, like, house booking, complimentary stay, etc. It is very important to not assign bookings here which could have their own viable segments.


There are many other segments, which can be useful for your property based on location. For example, an airport hotel will have a separate segment to monitor Airline bookings or a hotel with large corporate base, might segment the corporate business further. The key is to have suitable number of segments for your property to allow the revenue manager to take appropriate actions for each segment to increase the right revenue at the right time.

Next week we will discuss what actions can be derived from the data patterns shown by the segmentations.

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Author: Revenue by HRM

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