A segment of the market is a part of the market whose members have similar characteristics. In this way it is possible to market to them as a group. In tourism the major segments are business travelers and pleasure travelers.
Business travelers
The segments of the business market are regular business travelers; business people attending meetings, conventions, and congresses; and finally, incentive travel.
Regular business travel. Approximately one in every five trips taken in Canada and the United States is for business reasons. As business increasingly becomes international in scope there is an increase in international business travel also.
The business ties between North America and Europe have traditionally been strong. Of late, however, the focus has been on increasing business ties with the Far East. We have seen, and would expect to continue to see, an increase in international business travel between these two areas.
The bulk of North American business travel involves the airlines. Business travelers tend to be well educated, affluent, have high-level jobs and fly often. Their profile makes them excellent prospects for pleasure as well as business travel.
Increasing numbers of women today travel on business. They presently comprise between 15 and 25 per cent of the market. Women business travelers
- are slightly younger;
- tend to stay longer at their destinations;
- are more apt to be unmarried;
- are more likely to be attending a meeting or convention;
- are more likely to book through a travel agent;
- have a greater preference for downtown accommodations closer to their work;
- are more concerned with the security aspects of their accommodation facilities.
Both airlines and hotels are making special efforts to appeal to this group of travelers. The cost of a trip is paid for by the company as a cost of doing business. In addition, it is often a reflection of the image the business wants to project. For example, it might impress clients to meet in a luxury property. As a result, airlines appeal to business travelers through the provision of first-class and business-class seating. These facilities offer wider seats and more leg room. Business travelers can argue to their companies that, because they have more space, they can more readily work as they travel.
Many hotels offer special executive floors and have secretarial, telex, and computer facilities available. The Meridien Hotel in New Orleans in the United States offers these and other business services on a complimentary basis seven days a week.
Frequent-flyer and frequent-stay programs have been developed to encourage the business traveler to choose one particular company. By flying a certain number of miles (kilometers) or staying a specific period, the traveler can choose a bonus flight or hotel stay. After 45,000 miles (72,420 kilometers) of travel on Continental, the TravelBank member can claim a first-class ticket within the United States, Canada, or Mexico. Each stay at a Sheraton Hotel accumulates points toward gifts from a catalog. The various sectors of the industry have also gotten together so that staying at a particular hotel, renting from a specific car rental company, and flying a particular airline will accumulate points for the one program.
As businesses have become more concerned with the bottom line they have begun to look more closely at the way their employees rack up travel prizes. An employee may have the choice of a less expensive airline but choose the one whose incentive program he or she belongs to. The US Internal Revenue Service is also exploring whether or not these awards should be taxable. Lastly, a new industry has emerged consisting of companies who "buy" accumulated mileage trips and sell them to others. The airlines have become rather upset about this because it defeats the purpose of their efforts, to reward the frequent flyer.
Meetings, conventions, congresses. About 20 per cent of all business trips are for the purpose of attending corporate meetings or conventions. Conventions may be institutional or corporate/government. The term "institutional" means associations and other groups that have a shared purpose. The "corporate/government" segment refers to organizations that deal with specific business or government concerns. They tend to be private in nature.
A congress, convention, or meeting is defined thus:
a regular formalized meeting of an association or body, or a meeting sponsored by an association or body on a regular or ad hoc basis. Depending on the objectives of a particular survey, this may be qualified by a minimum size, by the use of premises, by a minimum time or/and having a fixed agenda or program. 1
Over 80 per cent of American associations hold a major annual convention for their members. In addition, many businesses bring managers together with corporate staff at least once a year. This complements the numerous local and regional meetings held annually.
Conventions can be international, continental, national or regional. International conventions involve participants from more than two foreign nations and take place in different countries each year. They are usually nongovernmental in nature. It is forecast that the number of attendees of such events will have doubled between 1973 and 1993. An example is the International Association of Scientific Experts in Tourism, which in recent years has met in Europe, Africa and North America.
Continental conventions limit their meetings to one continent. The Travel and Tourism Research Association has meetings in the United States and Canada.
National conventions tend to be limited by their by-laws or by tradition to meeting within the country within which the parent organization is located. Usually participants are citizens of that country. National conventions may rotate around the country geographically to give representation to all its members.
Regional conventions are organized at the state, provincial or regional level.
It is estimated that expenditures on meetings and conventions by associations run about USD 35 billion; over USD 11 billion is spent by corporations. On average in 1985, convention delegates each spent USD 464, staying on average four nights. Almost half was spent on lodging, 25 per cent on food, and just over 10 per cent for retail purchases.
Alarmed at the amount of money being spent on conventions outside the United States, the federal government has attempted to control convention expenditures. In 1976 the Tax Reform Act permitted US corporations to hold only two conventions a year outside the United States. Attendees were allowed to deduct expenses from only two foreign conventions a year. In addition, detailed records had to be kept by the organization and the attendees. These regulations lasted four years. A new law is in effect that allows US residents to deduct all relevant expenses in the "North American Zone", which includes Canada and Mexico.
Incentive travel. An increasing number of companies offer travel as a reward to their employees who have met company objectives. Travel is used as an incentive to perform. It has been noted that:
travel which is earned through effort salves not only the ego, but the conscience as well.
A company might have a sales contest to increase sales volume. Quotas are set for the sales staff. Those who surpass their quota by a set amount are eligible for the trip. The average incentive travel trip lasts five days and involves an average of 174 people. The most popular incentive travel destinations are Mexico, the Caribbean, Bermuda and Europe. Within the United States, Hawaii, Las Vegas, Miami, Disney World, San Francisco, San Diego and New Orleans are popular.
A number of specialized companies have developed to handle these trips. They not only design the incentive program but also organize the travel itself. Many belong to the Society of Incentive Travel Executives (SITE). These companies act as tour wholesalers. Buying for a group, they can negotiate special rates from the airlines, hotels and ground transportation companies they deal with. To this they add a 15 to 20 per cent markup for their services and costs in packaging the trip.
Hybrid. The hybrid trip is one in which the traveler combines business and pleasure. Business travel can be "converted" into pleasure travel in one or more of three ways. First, the traveler may bring his or her spouse along. The spouse is a pleasure traveler while the business traveler works.
Second, the traveler may decide to stay before or after a meeting. A business trip to Denver in the US in January may induce a traveler to arrive on the previous Friday for a weekend of skiing. People in managerial and professional positions account for seven out of ten business trips. Approximately 20 per cent of these travelers tack on vacation days to business trips.
Third, the traveler attending a convention may decide to return, either alone or with family, for a pleasure trip at another time of the year. Fully one-third of business travelers revisit vacation sites where they had previously attended meetings or conventions.
As more and more spouses enter the business world, the opportunity for hybrid trips will increase. The major problem will be in meshing the two work schedules.
Pleasure travel
A study by The Longwoods Research Group Ltd. for Tourism Canada broke the US pleasure travel market into eight types, based on trip purpose. 2 Researchers found that approximately 130 million Americans, aged 16 or over, take nearly 500 million overnight pleasure trips a year and spend nearly 2 billion nights away from home. The study notes, however, that most travelers are in the market for more than one type of vacation trip and suggests segmenting the market on types of trips rather than types of markets.
Visiting friends and relatives. Visiting friends and relatives accounts for 44 per cent of total trip-nights (one trip-night is one trip that lasts one night; two trips that last four nights each would be eight trip-nights). These trips tend to be relatively unplanned, involve little use of travel agents or the media, and are of short duration.
Close-to-home. Close-to-home leisure trips account for 13 per cent of all trip-nights and are also relatively unplanned and of short duration. Additionally, little use is made of the media for information on where to go. The average length of stay is between two and three days. Eighty-five per cent of the travelers use their own cars. Just over one-third stay in motels while one-sixth use a hotel or stay with friends and relatives. Over 10 per cent camp or take a trailer.
Touring vacations. Touring vacations make up 14 per cent of all trip-nights. These trips have no single focus. They last an average of eight days, are planned one to two months in advance, and, while friends are the most used source of information, travel agents and the media are also important. One out of five trips involves a package deal. This type of tourist is interested in beautiful scenery with lots to see and do. Such individuals want to visit a well- known, popular area that offers familiar landmarks and is definitely not dull. In over one-quarter of the trips at least part of it is booked through a travel agent. These tourists tend to travel by car, although in one-quarter of the cases a plane is used. One out of eight travel by bus. Friends and relatives provide the accommodation 20 per cent of the time; the remainder of the stays are split between motels and hotels.
Outdoor trips. Those taking outdoor trips represent 10 per cent of all trip-nights. These people tend to plan their trip less than one month in advance and rely most on the advice of friends for places to go. The average length of the trip is between three and four days. These individuals are interested in beautiful scenery with lots to see and do. They want real adventure but not too wild; they want to travel not too distant, and most are interested in fishing and hunting.
This tourist travels exclusively by car, truck, or van and, in two-thirds of the cases, stays in a campground or trailer park.
Resort vacations. Eight per cent of the trip-nights are spent on resort vacations. Travel by plane accounts for almost 30 per cent of the travel. Tourists stay either in a hotel (31 per cent), motel (26 per cent), lodge (14 per cent), or condominium (13 per cent). The average length of stay is five days, and in one out of five cases the trip is part of a package deal. This segment accounts for the greatest use of a rental car (15 per cent). These tourists want to visit a place that is popular in a well-known area and that has beautiful scenery with lots to see and do. They want a place that is exciting yet still offers the opportunity for walking and strolling. Over one-third of these trips are planned more than three months in advance while another third are planned between one and two months ahead of time. Travel agents are used both for information and for booking the trip in one-fourth of the trips. The resort traveler is interested in relaxing, getting away, and being entertained. Less than 20 per cent are interested in golf or tennis.
City trips. City trips make up seven per cent of all trip-nights. Half of these trips are booked less than one month in advance. They tend to be a short, impulsive getaway. The family car is the predominant (70 per cent) mode of transportation while, at the destination, three-quarters of the travelers stay in a hotel or motel. Staying with friends and relatives makes up the remainder. For this tourist it is important that the city be famous with first- class hotels and elegant restaurants. It should be popular, definitely not dull, and should have well-known monuments. These tourists are less interested in nightclubs and bars.
Theme parks/special events. Visits to theme parks or special events make up only three per cent of all trip- nights. Over 40 per cent are planned less than one month ahead while just over a quarter are planned between one to two and over three months in advance. This traveler is interested in a well-known, even world-class, attraction, something that offers activities for all ages, that has lots to see and do, that is exciting, and that the children would enjoy. The average trip lasts just under four days. Three-fourths of the trips involve the use of a car; in one out of ten situations it is a rental car. Just under 20 per cent of the trips involve staying with friends or relatives; the remainder of the stays are split between hotels and motels.
Cruise. Lastly, there is the cruise. Accounting for one per cent of total trip-nights, people who take cruises want to enjoy beautiful scenery, something different with lots to see and do. They want real adventure, do not want the trip to be dull, and are interested in all the comforts. Cruises average over six days, and almost two-thirds of such trips are packages. Most cruises are planned more than three months in advance. This segment of the market is the only one where the advice of a travel agent (67 per cent) is sought more than a friend's (51 per cent).
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