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.
