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Revenue Management Woordenlijst



The Group Displacement Model is a tool that helps hoteliers determine whether it is more profitable to accept a group booking or to prioritise transient business, by comparing the potential revenue (including room and non-room revenue streams) that could be earned for each. The model also takes into consideration the operational costs associated with hosting both market segments, the occupancy and the length-of-stay (LOS) impact. Finally, the model takes into consideration the non-revenue costs of each, to determine whether accepting the group booking makes good business and financial sense.

How to use it

Understanding and calculating group displacement cost using the group displacement model, is crucial for revenue managers to optimise their booking mix and maximise profitability.


1. Calculate the anticipated group revenue by adding up the room costs, plus any additional non-room revenue (including meeting room rentals, catering, etc.).

2. Create a forecast to show how much revenue will be earned from selling the same rooms to transient guests during the same period. You will be able to establish a much more accurate forecast using your automated pricing solution (RMS), as it can accurately collect and analyse market data, historical data and current projected occupancy, among other variables. In your forecast, include both your potential ADR and non-room revenue, as both are important to your bottom line.

3. Subtract the total forecasted group revenue from the total projected transient revenue to calculate your group displacement cost.

4. Determine the variable costs for both and, for both the group and transient opportunity, subtract the cost from the total ancipated revenue to determine the net cost of both. If the value is positive, it indicates that you might be losing out on revenue on taking the group business. If it’s negative, the group business would be more profitable than the transient business, meaning that it could be a good business decision to accept the group booking.

5. Finally, consider the non-revenue impact of the group booking, such as whether or not the group could become a repeat customer, the alignment of the group’s brand with your own and how the event will impact other guests staying at the property at the same time. As long as there are no significant negative non-revenue factors, use the financial calculations (as determined in step 4) to determine whether accepting the group booking makes good business and financial sense.

Related Terms

Revenue Management, Transient business, Group Business, ADR, RMS, Non-room revenue, Ancillary revenue, Forecasting, Group displacement cost, Revenue Management System (RMS), Historical data, Market data, Occupancy, Historical data, RevPAR, Group Displacement Cost
“Calculating the displacement cost, using the group displacement model, can be complicated but it’s worth the effort to accurately establish the income potential of the group opportunity vs. the other potential business that the rooms could earn, and choose the option that maximises revenue opportunities. By evaluating the group displacement, hoteliers will know whether it is a better business decision to accept a group booking or if they should keep inventory available for transient travellers instead.”

Hendrik Niehues

Hendrik Niehues