Tourism segmentation studies have traditionally developed segmentation variables from secondary data or a review of the literature. Based on stakeholder theory, this study recommends a two-step approach to destination segmentation, incorporating the views of multiple stakeholders. This article details the recommended segmentation approach using one Australian destination. Step 1 involves understanding how multiple stakeholders viewed their market to identify relevant segmentation variables. Step 2 involves segmenting the destination based on the variables identified in step 1. When compared with segments currently used by the destination marketing organization, the segments derived from the two-step approach to segmentation capture more of the tourists visiting the area. Segmentation guides budgetary decision making, and the proposed two-step approach to segmentation may assist tourism destinations to maximize limited resources by targeting more of the types of tourists who are frequenting the destination.
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