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Displacement Calculation

Are your contracted non-yieldable segments adding to your bottom line? Or are they displacing revenues that can be generated by selling public transient rates? Important questions from a revenue management perspective.

In the example below, if a LRA (Last Room Availability) account books 2 nights arriving 04 February, the hotel will have to accept the reservation. Let's say that the account contracted rate is 100 euro. The hotel will lose with that stay 200 euro (corporate room value minus the last room value.

displacement-rmb

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The last room value (LRV) is the total value of the last rooms to sell. It can also include the Total Revenue or the Total Net Revenue. A displacement calculation or analysis should be regularly performed on your main accounts to evaluate the revenue gain: revenue displaced on identified dates minus the positive revenue on non constrained dates.

In hotel revenue management that requires extracting the day by day production of your TOP accounts (Tour Operators, Corporate, Consortia and IDSs) and evaluating day by day the possible displacements.

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