Displacement analysis — group inquiries & group bookings

What is a displacement analysis?

The Displacement analysis is nothing more than a preliminary analysis for a group booking or group trip. The analysis attempts to calculate whether a group trip is worthwhile. In other words, what do you lose or gain during a group trip. Because not every transaction with a large number of bookings is economical.
It is important to take a closer look here and not accept every booking.

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What do I have to consider when making a group booking/group enquiry?

The correct planning figures for bookings are important during an analysis. A good displacement analysis can only be carried out if you know what can actually happen. The alternative demand that would stay at the hotel without the group booking should be estimated. Based on the correct forecast, a displacement analysis can be carried out. happyhotel can help you with this, because our goal is to predict demand for the future.

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Calculation example of a displacement analysis or group booking/group request

We have created an example of a displacement analysis for you here. This allows you to calculate whether a group booking is worthwhile for you.

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Starting point for the calculation:

We're looking at a three-night group booking. The hotel has a total of 100 rooms and the group would like to reserve 30 rooms per night. These are the results of our forecast:

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On day 1 we expect 70 rooms with individual guests, on day 2 95 rooms and on day 3 85 rooms.

The average rate is €120.00 per room and the variable costs amount to €50.00 per room. This therefore generates a contribution margin of €70.00. The group can expect additional income from food and drinks of 800.00€.
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The group request has a price of €60 per room.

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Calculation procedure:

1st day: According to the analysis, we have an occupancy rate of 70 rooms, excluding group bookings. If we accept the group booking, we will have an occupancy of 75 rooms. With the capacity of 100 rooms, we don't have to make any cancellations.

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2nd day: According to the forecast, we have already occupied 95 rooms on this day. When accepting the group, we need a total of 125 rooms. But there are 25 rooms missing, so we would have to cancel individual guests or there will be crowding out here.

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3rd day: According to the forecast, 85 rooms will be sold. With the group booking, we have another bottleneck. We have to cancel 15 rooms and here, too, there is a crowding out of 15 individual guests.

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If we accept the group booking, we will have to cancel a total of 40 room bookings.
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This results in the following calculation:
Individual guests would pay an average of €120.00€. 40 rooms must be canceled.

individual guests (ADR) x 40 cancelled rooms = €5,050 (opportunity costs), if the group is accepted.

Now the €5,050 minus our turnover must be divided by the group booking:

At first glance, we should make more profit here if we accept the group booking. But if we add our costs now, the following calculation will be made.

In our example, we should cancel the group, otherwise we will lose €950. The example shows that you don't have to accept every booking. Change the price of the group booking here, from €60 to at least €72 per room.

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Excel template

You can do that here View and download Google Sheet.

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Useful video from experienced revenue managers can be found here:

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Conclusion

As already mentioned, it is important to make sure to use the correct plan figures for the analysis. As well as knowing the lower price limit. Only then can you make a decision as to whether you can accept a group request. You know at what price you can accept the group booking.
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Only very few hotels tell large groups the correctly calculated price because they are thinking too short term. This requires a great deal of trust in the data. At happyhotel, we rely on data and leave nothing to chance.

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You shouldn't miss out on a displacement analysis, especially in times when demand is particularly high. This actually applies to every hotel. Analyze each request to give the group a price that is also worthwhile for the hotel.

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