When it comes to hotel occupation, fitting in all the pieces is never easy, especially when some decisions mean replacing some clients with others, depending on the market rhythm and profitability of the different segments.
In today’s post, we will delve into the aspects of Revenue Management that intervene in displacement analysis.
A displacement analysis should be made when accepting a group booking entails moving other clients (whether transient guests or other groups). Faced with this situation it is a useful and efficient tool (technical and practical) that will help the hotel determine what bookings to accept and what clients to move on.
The analysis is normally based on spreadsheets that provide important numerical information, but this is not the only factor of the analysis, as other elements also make up client value:
- Main revenue: room sales.
– Secondary revenue: Food and beverages, hire of halls; depending on the type of hotel, rooms are also considered as secondary revenue.
– Cost of acquisition: the cost involved in acquiring a client (marketing expenses, booking costs, OTA commissions, TTOO, etc.).
– Likelihood of future trade: loyalty.
Displacement can be divided into three phases:
1. Establish the nett income differential per room.
2. Establish the nett differential in food and beverage and hire of conference rooms.
3. Determine other income
To properly establish the net income per room the following variables must be considered: the number of room nights of the group, the group rate, income per room generated by the group, net income per room generated by the group, the number of transient (also known as regular) guests according to the forecast and without prior bookings, displaced clients and potential for income.
It is also necessary to take into account more general determining factors such as the financial context, the season and fluctuations due to the difference in peak and off-peak season.
On the other hand, revenue managers should not forget the particular features of both transient clients and groups. The first segment allows a more precise forecast as it is based on fairly foreseeable historical data. Groups though, respond to unique needs each time.
In fact, they generally represent a lower percentage of bookings in comparison with transient clients. So much so that these bookings tend to be handled by phone or email. Irrefutable proof of this trend is that a large part of the income a hotel earns from groups comes from the additional Food and Beverage services. Each group requires personalized dealings.
For example: prepare a conference room for 100 people to have a gala dinner. At Innwise, as Revenue Management specialists, we will be thrilled to advise your hotel regarding displacement.