Hotel Revenue Glossary · Demand

Demand Displacement

The phenomenon where accepting one type of business (typically lower-rated groups or contracted rates) pushes out other demand that would have booked at a higher rate. Displacement quantifies the revenue difference between the accepted and the foregone business.

Why it matters: Every room sold to one guest is a room unavailable to another. On dates where transient demand is strong, accepting a discounted group may displace bookings that would have materialized at BAR. Displacement analysis prevents this costly mistake.

Worked example: A 140-room hotel forecasts 118 transient rooms at A$205 for a Wednesday. A group asks for 40 rooms at A$150. Take it and 100 rooms are left for transient, so 18 transient rooms are displaced. With the group: (100 x A$205) + (40 x A$150) = A$26,500. Without it: 118 x A$205 = A$24,190. The group adds A$2,310 before servicing cost — and goes negative the moment the transient forecast passes 130 rooms.

Common mistake: Comparing the group rate to ADR instead of to the forecast. Displacement only exists where the date would otherwise fill; on a 62%-occupancy Tuesday nothing is displaced and the same A$150 group adds rooms you would never have sold. Run the sum against that date's own transient forecast, not the month's average rate.

All glossary terms Displacement Analysis Group Business Transient Business