August 18, 2015

Developing a Global Hotel Chain Segmentation

 

The Situation

A global hotel company with close to 10% market share commissioned us to build a market segmentation to support their strategic planning in respect of acquisition and sales of hotels

The Client’s Business Goals

  • The overall goal was to understand how the distribution of their own hotels compared to the competition by region and city
    • This knowledge was to be more fine-tuned than simple chain or brand name recognition, and was to inform decisions about purchasing or disposing of hotels on a global basis
    • All substantial hotels around the world belonging to brands and chains (around 50,000) were to be individually allocated to a segment so that the capacity and locality of the competition could be studied in any geography

Our solution

  • The client already subscribed to a global hotel database with most of the 50,000 brand and chain hotels being identifiable
    • These were described in the database by a number of attributes including average room rates, location type, size, business and leisure mix, short or long stay etc.
    • We used clustering techniques to build the segmentation, putting hotels of a similar level and type together (whilst making allowances for different pricing levels in different parts of the globe)
    • The output was then transferred to a pivot table enabling the client to filter by location, segment, scale etc. in this way they had access to competition strengths and weaknesses in any part of the globe

Key benefits

  • The main benefit was better information with which to make decisions about acquisition and sales
    • However because of the way the data was held we were able to rank opportunities according to the scale of the opportunity to acquire, or because overcrowding providing recommendations to sell
    • The client was able to move away from comparisons based on brand presence and look more deeply into competition and opportunity based for instance in the number of rooms by level across all chains in relation to the size of the city in question