Hospitality Market segmentation Understanding the concept of market segmentation is essential to hospitality marketing. Marketers first segment the market prior to selecting specific target markets for their hospitality establishment. Market segmentation is the act of dividing a market into distinct and meaningful groups of buyers who might merit separate products and/or marketing mixes. Once careful thought has gone into market segmentation, marketers can then identify primary (and secondary) markets they wish to target.
A major assumption in the practice of market segmentation is that the marketplace is comprised of heterogeneous groups of buyers, i. e. , different groups of people have different needs and wants and, thus, are attracted to different product offerings accordingly. In hospitality, the ‘purpose of the trip’ is a starting point for the segmentation process. We need to first consider whether people are primarily traveling for business purposes or for leisure purposes. Within each of these categories segments emerge. The following discussion highlights some of these major segments that marketers target in hospitality.
The business travel segment The business traveler is looking for efficiency and effectiveness in a timely manner to conduct business away from home base. Major segments in business travelinclude individual, corporate, and the conference and convention market. Individual business travelers are essentially entrepreneurs who travel to conduct business on their own behalf. Independent business professionals such as lawyers, accountants, doctors, contractors, consultants, and the like (i. e. , people who do not work in the corporate environment), are typically categorized in this market segment.
They are the sole decision-maker on when, where, and how they travel to conduct their personal business. Whether these individuals operate a small- or medium-sized business, the specific purpose of the trip will impact their choice of budget, midscale, or upscale accommodations. It should be noted that the term ‘FIT,’ or free independent traveler, is often used to identify this market. However, the FIT nomenclature does not clearly distinguish the important difference between business versus leisure travel. Individual corporate travelers are those who travel to conduct business for the corporation with which they are employed.
This normally implies that they are traveling on their own and not involved with group activity. Many large corporations have travel departments who make many, if not most, of the travel and accommodation decisions for their traveling employees. Indeed, travel managers for these types of corporations are a segment in themselves and are often targeted by the large chain hotel companies that seek business clientele. Similar to the individual traveler, the specific purpose of the trip, such as a sales appointment with a potential client or an intra-company business appointment, will help determine the type of accommodation they require.
In other words, all business travelers are not necessarily in the same market segment. It all comes down to the particular purpose of the trip being planned. The conference and convention market (also referred to as the meetings market) is another major segment in business travel. These are group events where people gather for a common business purpose. Conference implies smaller groups of, say, 50–150 persons, where as convention normally suggests groups of 200 attendees. Major players include associations and corporations.
Associations are organizations that are formed to serve the common interests of its membership. CHRIE, or the Council of Hotel, Restaurant, and InstitutionalEducation, for example, is an association made up of hospitality and tourism educators. The CHRIE annual convention is held each summer in alternating cities throughout North America. Each year the specific location is chosen by the CHRIE executive committee and members of the association can choose (or not choose) to attend the convention in any given year.
Corporations hold a multitude of conferences and conventions throughout the year for varying reasons, including regional and national sales meetings, training seminars, new product introductions, etc. Selection of personnel to attend these meetings is at the discretion of the individual organizing the event, and attendance is very often mandatory. People who plan the logistics for an event (who may or may not be the person organizing the meeting, its agenda, goals, etc. ) are called meeting planners. They may work directly for the organization or may be independent contractors.
Outsourcing meeting planning to independent meeting planners is becoming more pronounced in The leisure travel segment Similar to the business market, market segments in leisure travel consist largely of individual and group travel. The leisure traveler is looking for relaxation away from home or, in some instances, to attend to personal affairs such as weddings, funerals, bar mitzvahs, christenings, and so forth. Relaxation means different things to different people. For example, for some it may be sunbathing on a sandy beach in Florida or on the Mediterranean coast in southern France.
For others, it might be hiking, biking, rafting, and kayaking across Costa Rica in Latin America. Culinary tourism is on the rise, too. As noted in a recent publication, ‘Cooking schools around the world are putting more emphasis on understanding the cultures that spawned them’ (Globe and Mail, 2003). In other words, the purpose of leisure travel varies widely. The individual travel segment is largely comprised of singles, couples, families, and mature travelers. Single travelers sometimes travel on their own or explore with colleagues and friends.
The same holds true for couples. Often couples will share villa rentals, apartment rentals, and time share or vacation ownership purchases depending on the similarities of travel preferences. Honeymoon couples, needless to say, normally prefer their own accommodations (! ) Families may travel to visit relatives, explore new destinations, and/or return each year to their favorite retreat for the annualvacation. Mature travelers are growing in numbers and travel for myriad reasons as do singles, couples, and families.
The mature traveler is commonly defined as persons aged 50+ . Mature travelers, in particular, often choose to travel with organized tour groups, which is discussed next. Group travel is a major segment in leisure travel. This segment is largely made up of tour groups for leisure travelers who want their trips planned for them. Tour group operators organize the trips, which include selecting a destination, planning the itinerary, and arranging for lodging accommodations, ground transportation, meals, sightseeing, etc.
Often these planned excursions are escorted tours which means that a representative from the tour operator travels with the group throughout the trip. Group tours vary in duration yet typically range from five- to seven-day excursions. Segments and people An important concept when thinking about segments is that one person can be in several segments depending on the particular purchase occasion. Segmentation derives from the purpose of travel and not individual people.
A person may be a corporate traveler during the week and then a leisure traveler with his or her family on the weekend – different purpose of travel, different needs, different wants, different price sensitivities, and so forth. As noted by Theodore Levitt, renowned for his seminal work in marketing, ‘If you are not thinking segments, you are not thinking’ (Levitt, 1986). This line of thinking very much holds true in today’s marketplace. References Levitt, T. (1986) The Marketing Imagination. New York: The Free Press, p. 127.
