If you prefer to play it safe, you might take the group. If you’re more of a risk-taker, you might wait for a more lucrative opportunity.
But in today’s data-driven world, revenue decisions shouldn’t come down to gut instinct. There’s too much at stake – whether you’re running an independent hotel, a multi-property group, or a franchise property.
Let’s take a closer look at how to evaluate group vs. transient business so you can get the most out of every booking decision.
Strength in Numbers: Benefits of Group Bookings
First up: the advantages of taking group business:
- Guaranteed revenue. Groups book in advance, giving you predictable occupancy and a solid base to build on with higher-rated business.
- Off-peak demand. Corporate groups often book during low seasons and midweek, helping fill those hard-to-sell nights.
- More ancillary revenue. Groups spend on services not typically used by transients, like meeting space, events, and group meals.
- Operational efficiency. With set arrival times, meal plans, and schedules, groups make it easier to plan and run operations smoothly.
- Lower distribution costs. Groups are usually booked directly, meaning less reliance on OTAs and fewer commissions to pay.
Freedom to Flex: Benefits of Transient Business
Now let’s talk about what makes transient business so valuable.
- Higher ADR. Transient guests often pay more for rooms, especially during high-demand periods.
- Greater flexibility. You can adjust rates and availability dynamically, based on what’s happening in the market.
- More control. With transient business, you can fine-tune your segment mix and choose your most profitable channels.
- Ancillary spend. Leisure guests often splurge on spa treatments, upgrades, room service – you name it.
- High-value bookings. You have more freedom to prioritize VIPs, loyal guests, and last-minute high-rate stays.
So, Which Is Better – Group or Transient?
It depends. Group bookings bring stability, operational efficiency, and strong total revenue. Transient bookings, on the other hand, offer pricing flexibility and higher profit per room. Most hotels do best with a healthy mix of both.
But every group is different, and so is the transient business it might displace. Each opportunity needs to be weighed carefully.
The right decision depends on your market conditions, seasonality, and how your hotel is positioned. That’s where smart analysis comes into play.
How to Decide: Group or Transient?
When deciding whether to accept a group or hold out for transient demand, ask:
- What type of hotel are you? If you’re near a convention center or have lots of meeting space, groups probably make up a sizable part of your overall mix.
- What are the stay dates? Do the group’s arrival, departure, and length of stay align with demand patterns, or will it leave you with gaps on shoulder nights?
- How far out is the booking? The longer the lead time, the more opportunity there is to fill rooms with higher-rated transient business.
- What’s the group’s total value? Look at ADR and room nights, but also factor in ancillary revenue and any extra costs like labor or commissions.
- What’s the displacement cost? If you take the group, what revenue might you lose from transient guests (or another group)? See “Revenue Displacement Analysis” below for details.
- What are the contract terms? Is there a minimum room commitment? Can the group reduce its block without penalty? Is it a repeat client worth keeping happy?
- How will it affect operations? Can your team handle it without added stress? Will it force you to turn away loyal guests, VIPs, or high-value bookings?
An accurate, up-to-date demand forecast will contain answers to many of these questions. If transient demand is looking weak, a guaranteed group at a fair rate might be the safer bet. But if demand is looking strong, holding out could pay off.
Taking a Data-Driven Approach: Revenue Displacement Analysis
A revenue displacement analysis helps hotels determine whether accepting a group would push out more profitable transient business. It compares the group’s projected revenue to what the property might earn from transient bookings over the same dates.
Key factors in a displacement analysis:
- Historical booking and stay patterns
- Forecasted occupancy and rates
- Market demand trends
- Current booking pace
- Stay dates and length of stay
- Booking window
- Risk of not selling the rooms if you say no to the group
If the group brings in more total value, it’s probably worth it. If not, you might be better off waiting.
But Wait, Do You Really Want to Say No to a Sure Thing?
Before turning down a group, ask yourself: could you increase the group’s value instead?
Maybe you negotiate a higher rate. Or ask for a guaranteed spend on meals or events. You could also suggest alternative dates when demand is softer.
“In some respects, group pricing should be the opposite of transient pricing,” says Harley Araujo, RoomPriceGenie’s Global Franchises & Group Development Director. “The more rooms a group needs and the longer the stay, the more the hotel may need to charge because it’s taking up a lot of inventory.”
He adds, “When I was a revenue manager, I tried to never refuse a group. If it was displacing transient revenue, I’d simply price it higher – sometimes even more than the public transient rate.”
Displacement Analysis Made Easy: Meet RoomPriceGenie’s Group Booking Price Calculator
Displacement analysis can be time-consuming, but help is on the way!
Soon, at RoomPriceGenie, we will launch the Group Booking Price Calculator designed to make the process simple, fast, and accurate.
Here’s how it works:
- Enter the group details. RoomPriceGenie analyzes market data, historical pricing, and demand trends.
- Get instant rate recommendations. Data-driven, automated pricing ensures your offer is competitive and profitable.
- Review and refine. Adjust and finalize your group offer with confidence.
Need help making your case for an RMS? Check out How to Convince Your General Manager to Say Yes to an RMS.
Smart Group Decisions Start with Data
Group revenue management can make a big difference to your hotel’s profitability. But the key is to base your decisions on real data, not guesswork.
To learn how RoomPriceGenie can help your property increase your property’s profitability, start your free trial of our automated pricing solution today!
