The post-pandemic blurring of market segments
Hotels charge customers different room rates during different periods. One could pay $125 for a room in January and be charged $75 for the identical room in June. It all depends on the hotel’s occupancy levels or seasonal pattern. High occupancy (season) invariably means paying a higher price than that charged during low occupancy (off-season). Customers by and large, understand that the relationship between supply and demand comes into play, where prices rise when demand is high and supply is low; prices are dropped when supply is high and demand is low. We all get that!
Hotels also charge different customers different prices for the same type of room on the same night. This price discrimination is a worldwide accepted practice. Price discrimination allows hotels to sell rooms at the highest rates that customers are willing to pay and attract customers who might not buy otherwise, using lower rates. For example, a businessman books a standard room for $150. . On the day of arrival, (and of course unknown to him), the same room type was sold for $100 to a guest on holiday.
This is due to market segmentation – a methodology used by hotels to identify types of guests by certain characteristics. Broadly speaking, there are five primary hotel market segments: transient, business, group, corporate and wholesale segments. Each of the these major segments can be broken down into smaller, more specific market segments that further detail customer travel distinctiveness – such as purpose of trip (business/MICE/leisure), booking channel (direct/OTA), length of stay (short/long), party size (individual/group), and more.
Traditionally, hotels identify their segments and craft a market segmentation strategy, which then is set in the start of the budget year and put it aside for the rest of the year -because things remain as they are. Not any longer!
Bleisure which is a mix between business and leisure trips brings in elements of fuzziness. Does it fall into the business-end of market segmentation or be placed in the leisure bucket? The distinction gets cloudier when it comes to pricing, to the days of the week they stay, to the channels they book in.
The pandemic altered the formula that weekdays are for corporate demand and weekends for leisure – Leisure and business travelers now behave alike! Unlike in the past, when business travelers booked a hotel room via their company, bleisure travelers, driven by a leisure frame-of-mind are now likely to use bookings.com. They want to stay from Thursday night onwards - mixing work and pleasure.
What about the MICE industry? It may not zoom back to pre-pandemic levels, but it is advancing. We first saw pent up travel run loose on the leisure side followed by sports groups. Meetings and events are bound to be next – sooner or later. Hotels that rely heavily on the meetings and events industry to fill their rooms will do well to make sure their technology and staff is ready when that happens. They must be able to think outside the box (meeting Room) – because this industry would look different.
Where do digital nomads fit in? Digital Nomads are a population of independent workers who choose to embrace a location-independent, technology-enabled lifestyle that allows them to travel and work remotely, anywhere in the world. To some, Digital nomads exist at the intersection of travel, leisure, and work. Certain scholars categorize them as mobile and flexible workers cum global travelers. The current thinking is that they lean towards a life of leisure.
All this means that hoteliers will have to deal with blurring lines between evolving market segments.Not only must hoteliers have a clear idea of what their top demand generators will be, but also be prepared to respond swiftly to changing dynamics during the year ahead.
As Hugh Taylor, CEO of Michels & Taylor said, “What you’ve got to do when you have a hotel is understand your market incredibly well, know what the drivers are, know the macro- and micro-environment... and make sure you can mitigate where required.
Shafeek Wahab –Editor, Hospitality Sri Lanka, Consultant, Trainer, Ex-Hotelier
|
|
|
|
