Hotel Revenue Glossary · Strategy

Displacement Analysis

The process of calculating whether accepting a block of rooms at a discounted rate would displace higher-paying individual bookings. It compares the total revenue of the group against the revenue that could have been earned from transient demand.

Why it matters: Groups often request discounted rates. Displacement analysis ensures you don't accept a group that would actually cost you money by pushing out guests who would have paid more. It's one of the most important tactical decisions in revenue management.

Worked example: A group wants 40 rooms for three nights at A$165: 120 room nights, A$19,800, plus A$45 a room in banqueting, so 120 x 45 = A$5,400 more - A$25,200 in total. Those nights forecast at 114 sold out of 130, leaving 16 free, so the group displaces 24 transient rooms a night. Over three nights that is 72 rooms at A$235 = A$16,920 forgone. Net A$8,280 in favour, and it is still a yes.

Common mistake: Valuing the displaced rooms at BAR instead of at the rate they would actually have achieved. If the transient business you push out books at an average A$235 while BAR is A$289, using BAR overstates the loss by A$54 a room and kills groups worth taking. Displace against the forecast, not the shelf price.

All glossary terms BAR (Best Available Rate) Market Segment Forecast