Segment Smart, Manage Sharper: Market Segmentation in the Spotlight of Revenue Management

Revenue Management is not just about pricing – it’s about offering the right price at the right time to the right customer. But who exactly is the right customer? This is where the concept of market segmentation becomes essential. Without a clear understanding of different customer groups, targeted Revenue Management is almost impossible.

What Are Market Segments in Revenue Management?

Market segments are groups of guests who share similar booking behavior, needs, and willingness to pay. They help break down the often complex and unstructured demand into clear, manageable units — making it possible to develop tailored strategies.

A practical example:

Business travelers tend to book last minute, require flexibility, and show a higher willingness to pay. Leisure travelers usually plan in advance, are more price-sensitive, and prefer fixed, non-refundable rates. Both groups represent different market segments and require unique pricing and distribution strategies.

Why Are Market Segments So Important?

1. More Accurate Demand Forecasting

Segment-based forecasting makes it easier to recognize seasonal and behavioral trends — enabling better decisions. Forecasting demand per segment forms the basis for all further Revenue Management decisions.

2. Targeted Pricing

Only those who understand the price sensitivity of a segment can set optimal prices — maximizing revenue without deterring guests or offering unnecessary discounts.

3. Effective Channel Management

Different segments use different booking channels. Knowing this allows hoteliers to distribute offers more effectively — whether through OTAs, direct booking platforms, or GDS systems.

4. Controlled Availability and Rate Management

Segmentation enables precise control of rates, availability, and restrictions by channel or segment — a core principle of yield management.

What Makes a Market Segment Valuable?

Not every grouping is useful for Revenue Management. To be effective, segments should meet the following criteria:

  • Measurable: The segment must be analyzed through data — such as booking window, length of stay, or booking channel.
  • Reachable: It must be possible to target the segment with specific marketing or pricing strategies.
  • Relevant: The segment should contribute significantly to revenue or occupancy.
  • Homogeneous: Guests within a segment should exhibit similar behaviors.
  • Stable: The characteristics of the segment should remain relatively consistent over time.
  • Actionable: The segment should respond to Revenue Management measures like price changes or packaging.

Common Market Segments in the Hotel Industry

In general, it’s important to differentiate between transient (individual travelers) and group business, as these two types behave differently and require distinct strategies. Some well-established market segments in the hotel industry include:

  • BAR (Best Available Rate)
  • OTA BAR – BAR sold with a markup through OTAs
  • Corporate
  • Wholesale IT (Inclusive Tour)
  • Business Groups
  • MICE (Meetings, Incentives, Conferences, Events)
  • Crew
  • Long Stay
  • House Use
  • Complimentary

Conclusion: Segmentation Is a Must, Not a Maybe

Market segmentation isn’t a luxury — it’s the foundation of effective Revenue Management. Knowing your target groups allows for precise control over pricing, distribution, and availability. The result: better performance on paper and a clear competitive edge in today’s challenging hospitality market.

Birgit Haake - Expertin Revenue Management

Author: Birgit Haake

Birgit Haake has more than 25 years of practical experience in the hospitality industry and healthcare. With her company Haake Revenue4U, she supports individual hotels and hotel chains in Germany and Europe as an expert in revenue management. Her core competencies are booking management, (MICE) revenue management, pricing and online distribution. Birgit Haake holds a degree in business administration and has completed her training as a hotel manager. She is a certified trainer and has been a university lecturer in international hotel management and tourism management for many years.

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