Market Segmentation Reports

Market Segmentation – Road Map to Revenue Results

Imagine that you have driven for hours and hours and finally arrived at a place which looks like a big city. Would you not want to know where you have reached and more importantly whether that is the city you wanted to reach

How would you do that? Probably, by whipping out a Road Map and tracing your journey from source to destination so that you can determine whether you have achieved what you set out to do – meaning, reaching the place you wanted to go to.

Actually the Road Map is to be used the other way – you decide where you want to reach and use the Road Map to chalk out your driving directions. This is planning to arrive at a certain place and making ensure you do arrive at that place.


What does the Market Segmentation Report do?

The Market Segmentation Report is the Road Map for the target markets and consumer segments from which a hotel plans to earn its major revenues.

The Market Segmentation Report is a Revenue Management Tool and in its basic form lays out the various market segments that have contributed to the earning of the revenues during a particular business performance period.


What are Market Segments?

Market Segments are consumer groups with differing tastes, preferences and objectives to which hotels can target and market in a focused manner matching their needs and budget.

In short, the market segments are categories of consumers who will patronize the hotel and generate revenues for it. Since different types of consumers have varying needs in terms of the hotel product they are looking for and the price they are willing to pay, market segments determine in a structured manner each of those types which the hotel will adopt. This is key to generating revenues and meeting targets while also ensuring that profitability is enhanced and growth is achieved.


Different forms of market segmentation

Market segmentation can take different forms depending on important criteria applied for determining them.  These criteria could be geographic, demographic, psychographic, or behavioral to name the major ones.

A geographic variable, as the name implies, relates to the consumer’s geographic area of residence. Countries are often classified into geographic regions in order to pin point the market targeting effort.

A demographic criteria takes variables such as age,gender, income and expenditure patterns, family size, stage in the family life cycle, educational level achieved, and occupation.

Psychographic criteria refers to segmentation based on lifestyle, attitudes, and personality.

Behavioral criteria refers to segmentation based on behavior of consumers like extent of loyalty, inclination to respond to marketing targeted at them etc.,


How to use the Market Segmentation Report?

The Market Segmentation Report normally is a reflection of how the hotel is positioned in its competitive set market. Competitive set refers to the hotels which are considered as direct competition within the geographic area of operation.

Market Segmentation Reports are barometers of measurement of performance of a hotel in its core revenue sources. For example, if a hotel is positioned as a corporate hotel, then the corporate and related segments would be the bread and butter revenue earners for that hotel.

The Market Segmentation Report normally measures performance from three angles: revenues, room nights and average rate.

As said earlier, whether the hotel is driving room nights or average rates or both will be determined by the positioning of the hotel in the competitive set. Moreover, all marketing efforts will also follow this positioning and the resultant market segments.


Market Segmentation Reports & Financial Analysis

Since results from market segments are tracked according to revenues, room nights and average rates, these have a direct bearing on the profitability of the hotel.

One of the golden rules of profitability arising out of financial analysis is the fact that revenue contribution due to higher rates than room nights generates more profit.

It simply means that a hotel’s room department will show better profits in dollar terms when average rate has contributed to the revenues more than room nights. This is based on the principle that increased average rate will not be accompanied by any costs and thus will go straight to the bottom line. We will be looking at this principle of financial analysis in greater detail in a later post.

In the earlier blog post on Financial versus Operational Analysis, we discussed how informed decision making is key to effective decisions and results and the market segmentation is all about informed decision making on a hotel’s revenue sources.

The Market Segmentation Report is one of the most powerful tools for effective financial analysis.

In our next post in this series, we will be looking at two key areas related to Market Segmentation Reports – Repeat Guest Ratio and Average Length of Stay and how they significantly impact hotel revenues and profits.

About S Lakshmi Narasimhan

I am the author of this Blog and the Founder of Ignite Insight a consultancy practice which specializes in simplifying and teaching financial concepts to non-financial managers and individuals.
This entry was posted in financial analysis, financial analysis coaching, operational analysis and tagged , , , , , . Bookmark the permalink.

18 comments on “Market Segmentation Reports

  1. Pingback: The Funnel Principle of Financial Analysis | Financial Analysis sans Tears

  2. Pingback: Staff to Room Ratio in Financial Analysis - indicator at best | Financial Analysis sans Tears

  3. Pingback: Welcome, ye non bean counters | Financial Analysis sans Tears

  4. Vernell Perkowski on said:

    This was novel. I wish I could read every post, but i have to go back to work now… But I’ll return.

    • S Lakshmi Narasimhan on said:

      Hi Vernell
      thank you for the good comments. please pass on link to all your friends who will benefit from the posts.

  5. Rebbeca Zuccaro on said:

    I couldn’t agree more

  6. Pingback: Financial versus Operational analysis | Financial Analysis sans Tears

  7. Pingback: 2 Paths to Revenue Growth Nirvana | Financial Analysis sans Tears

  8. Pingback: 2 Paths to Restaurant Revenue Growth Nirvana | Financial Analysis sans Tears

  9. Brenda Pomarico on said:

    Sorry to annoy you this way but I just found your website and have to tell you it’s outstanding. Something which I believe would help you however is the SEOpressor plugin for wordpress. It’s frankly the greatest SEO plugin for wp that is out there today. In exactly Five days my website went from obscurity to the first page of google after having the SEOpressor plugin. Should you be interested you can install it here: SEOPressor

    • S Lakshmi Narasimhan on said:

      Hi there

      thanks for the good comments and the recommendation of SEOpressor plugin. I am currently researching it and will probably be installing it soon. thank you for your suggestion.

  10. best rated electric toothbrush on said:

    Is there something wrong with the CSS here? It all looks yellow and I can barely read the article?

    • S Lakshmi Narasimhan on said:

      What browser are you using and which version? I have tested it on Safari, Firefox, Chrome, Opera etc.

      Let me know. This is the first comment about this so I would like to rectify if there is something wrong in readability.

      Hope you liked the content.

  11. Minh Gershman on said:

    Amazing website, the only thing I detected is your on-page SEO needs some work and then you would definitely be ranking high in google right away! Have you worked with the SEOPressor plugin? It’s incredibly effective and user friendly. Obtain it here. Just figured I’d share. Best of luck to you.

    • S Lakshmi Narasimhan on said:

      I have installed SEOpressor and hope to see my ranking go up going forward. Thank you for the comments and recommendation.

    • S Lakshmi Narasimhan on said:

      Hi Minh
      I have already started optimizing my blog for SEO and will continue to do this. Thank you for the concern and the recommendation. Stay tuned for more posts of value.

  12. Keyword Insertion Plugin on said:

    Dear webmaster,

    • S Lakshmi Narasimhan on said:


      You did not complete your comment (other than the salutation). Let me know if you like the blog and the posts.