28Sep

Understanding Group Segmentation for Profit Generation

Author: Avanti Joglekar

There are numerous factors that impact group business revenue.  A well-designed platform of data and analytics is critical to ensure accurate forecasting and pricing.  Before you can start building out your metrics, you have to have a thorough understanding of your property’s segmentation, and nowhere is that truer than when dealing with group business revenue.

In short, hotel guest segmentation is the process of analyzing your customer base to determine how to divide it into different groups.  Those groups are based upon the purpose of their travel, what channels they’re using to make the booking, their habits and total spend during their stay, and what proportion each segment group comprises of your overall guest market.  The level of granularity in your particular segmentation profile will vary, but in general, these are the most common segmentation factors.

Obviously, the two biggest segments of your guest base are transient and business.  Within each of those segments are a myriad of potential smaller, more distinct guest segments.  Under the rubric of business revenue, there are two primary sources: group business that travels for a meeting or convention, and local catering and events business.

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Business guests that are traveling for meetings and conventions will need both sleeping room space and meeting rooms.  As such, depending on your particular property they could make up a huge portion of your hotel’s volume and occupancy.  Since these guests could displace travelers from other segments out of room and meeting space, it’s critical that you have the right forecasts so that you can price appropriately.

Local catering and events guests typically only require meeting or event space plus their required food and beverage needs.  They may not require many sleeping rooms, but this segment still has the potential to displace guests in other groups.  Since this group may not spend as much on room revenue, it’s important to balance demand from this segment with more profitable groups.  In fact, many properties prefer to wait to book these guests until they confirm their total headcount.

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Both of these groups present challenges and opportunities for pricing your transient room rates.  In fact, group business has an indirect but potentially beneficial impact on your transient pricing. Since transient guests typically book with less lead time than group business travelers, their rates are dependent upon the availability limitations on their preferred dates.  As a result, transient guests pay higher rates.  

You must have the ability to accurately forecast demand to both maximize your ability to generate profits and maintain the right mix.  The way that you segment your guests will ultimately determine your property's group business revenue management strategy and whether it succeeds or misses the mark. Click here if you’re interested in learning more about how group business segments work.

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