What is the meaning / definition of Displacement Analysis in the hospitality industry?
For a hotel, the idea of making money through accepting group business bookings sounds like a good idea – an obvious thing to do.
But is that really always the case?
The answer is No!
Sometimes it would be prudent to deny a group booking in favour of leaving rooms available to transient (non-business) customers and walk-in guests. The method used to make this judgement is called Displacement Analysis.
By using Displacement Analysis, a hotel can calculate the value of the group booking compared to what transient and walk-in bookings would generate by contrast. Based on the results of the Displacement Analysis, it can then make a decision on whether to accept a group business booking or not.
With any hotel booking, you have to consider the total value, not just the room rates. All food and beverage spending, meeting room rental, and any additional outlet spending (minus any costs) involved, as well as random ancillary in-house spending, will have to be factored into the Displacement Analysis calculation.
If the value of the displaced transient booking is less than that of the group business booking, then it would make sense to accept the group booking, of course (and vice versa!).
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