I85PREP
⌘ K
CRME study materials
CRME study resources

CRME: Segmentation and Customer Profitability

CRME · Work through your exam, one topic at a time.

All guide sections

Segmentation and Customer Profitability

Segmentation and Customer Profitability tests whether you can define segments by behavior, calculate contribution rather than rate, and value a guest or account over time. Expect net revenue, cost to serve, ancillary spend, loyalty cost, customer lifetime value, and displacement.

Segment architecture

Transient: retail, corporate negotiated, discount, loyalty redemption, opaque. Group: corporate, association, SMERF. Contract: airline crew, wholesale, tour. Segments differ in lead time, length of stay, cancellation, rate fence, ancillary spend, and channel. Define segments by these behaviors, not only by rate code, or the analysis will not predict demand.

From ADR to contribution

Net room revenue = room revenue − channel cost − commissions − loyalty cost. Contribution = net room revenue + ancillary contribution − variable cost to serve. Customer lifetime value (CLV) adds retention and frequency: CLV ≈ margin per stay × stays per year × expected years − acquisition cost, discounted. Share of wallet and RFM (recency, frequency, monetary) help prioritize accounts.

Worked example

Guest A: 3 nights at 180, booked through an OTA at 18% commission, ancillary 60, cost to serve 35 per night. Room revenue 540; commission 97.20; net 442.80; + 60 = 502.80; − 105 = 397.80 contribution.

Guest B: 2 nights at 220, direct at 5% cost, ancillary 150, loyalty cost 20, cost to serve 35 per night. 440 − 22 = 418; + 150 = 568; − 20 − 70 = 478 contribution.

B delivers 80 more contribution on one fewer night, because acquisition cost is lower and ancillary spend is higher. Now extend: A stays 3 nights, four times a year, for four years (48 nights): 397.80 × 4 × 4 ≈ 6,365. B stays 2 nights, twice a year, for five years (20 nights): 478 × 2 × 5 = 4,780. A wins on lifetime value despite losing on the single stay. Profitability analysis must state the time horizon.

Traps

  • Ranking segments by ADR or RevPAR contribution alone.
  • Ignoring channel cost and loyalty cost.
  • Treating a loyalty redemption as zero-cost revenue.
  • Counting group room revenue without F&B costs and displacement.
  • Ignoring acquisition cost for new guests versus repeat guests.
  • Using a single stay to judge an account's value.