Step
1: Customer Segmentation Analysis
To effectively analyze its customer
base, a hotel must carry out customer segmentation, classifying customers based
on their specific needs, willingness to pay, and length of stay. Key
segmentation categories include:
- Type of Trip:
Group, Transient, Contract
- Purpose of Stay:
Leisure (e.g., resorts, family vacations) or Business (e.g., training,
relocation, conventions)
- Buying Power:
Volume (Group), Single
- Service Needs:
High Service, Basic Service
- Flexibility & Willingness to Pay: Corporate rates, Senior Citizen, AAA
- Seasonality:
Peak, Off-Peak
- Day of the Week:
Weekend, Weekday, Shoulder Nights
- Length of Stay:
Less than 5 nights, Extended stay (5+ nights)
Additionally, customer segments
might include Price Shoppers, Brand Loyalists, Status Seekers, Convenience
Shoppers, and Service/Feature Shoppers.
Customer segmentation enables
extended stay hotels to identify their key customer segments. Understanding the
primary customer segments’ needs, average length of stay, and pricing
preferences helps define the right length of stay (LOS) tier structure and
benchmark pricing within each LOS tier and room type.
Steps
for Performing Customer Segmentation:
- Identify Top Customer Segments:
- By Room Pool
- By Weekday/Weekend
- By Length of Accommodation (LOA)
- By Season
- Use the LOA Demand Eye Chart – Detail Report to
analyze customer segmentation by market code.
i)
Top Market Codes: Review the “Mix, RNS (% of tier)” column in the All
Tiers section to determine how significant a customer segment is to the hotel.
ii)
Time Period Analysis: Examine different time periods for yearly or
seasonal trends.
iii)
Room Pool Analysis: Isolate trends by room pool type to determine
performance drivers.
iv)
Weekday/Weekend Cuts: Differentiate between weekend, weekday, and
extended stay customers.
- Identify Top Customer Segments by LOS Tier:
- Use the LOA Demand Eye Chart – Detail Report to
analyze market code segmentation by LOS tier.
i)
Identify Top Market Code/Tier Combinations: Examine the “Mix, RNS (% of
all tiers)” to assess the significance of market code segments within each
tier.
ii)
Room Pool & Time Period Analysis: Assess customer segments by room
pool, time period, and weekday/weekend differentiation.
iii)
Front Desk Input: Validate segmentation by asking front desk staff about
primary customer segments.
iv)
Market Patterns: Observe guest travel patterns and reasons for visiting
the hotel (e.g., conventions, relocation, leisure).
- Identify Trends in Top Customer Segments:
- Using the LOA Demand Eye Chart – Detail Report:
i)
Determine Room Night Mix Trends: Identify increasing or decreasing
customer segments.
ii)
Analyze Revenue and Rate Trends: Evaluate year-over-year changes in
rates paid by each segment.
iii)
Assess Price Sensitivity Trends: Identify which customer segments
exhibit changes in price sensitivity.
iv)
Use the Tier Evaluation Report to analyze business segments associated
with top customer segments, including rate, demand, and stay pattern trends.
- Evaluate Hotel's Customer Base Against Long-Term
Strategy:
- Is the hotel attracting desired customers?
i)
Would adjusting the LOS tier structure help capture new customers or retain
existing ones?
ii)
Analyze how changes in LOS tiers would affect Extended Stay Occupancy, ADR, and
Mix metrics.
Examples
of Customer Segmentation Impact:
Example 1:
An extended stay hotel near a convention center might identify its primary
customer segments as convention attendees (6-night stays) and convention staff
(10-night stays). Based on segmentation, the hotel could set LOS tiers at 1-6
days for attendees and 7-12 days for staff, though competitive assessments and
performance analysis are needed before making any changes.
Example 2:
A resort market hotel catering to 6-night leisure guests and 2-night weekend
guests might consider raising rates for high-demand room types like two-bedroom
and penthouse suites, setting the first LOS tier break at 1-6 days.
Example 3:
An urban extended stay hotel with predominantly business transient guests and
no direct competition in its comp set could extend its first LOS tier from 1-4
days to 1-5 days.
Customer
Segmentation Summary:
At the end of this step, you should
be able to:
- Identify the hotel’s top customer segments:
- By length of stay tier
- By length of accommodation
- By room pool type
- Identify trends within the hotel’s top customer
segments.