Group Business Threat or Opportunity Room Type Displacement Model

Group Business, Threat or Opportunity: Room Type Displacement Model

In my previous article I started to talk about the group quotation and a simple group displacement model.

NB: This is an article from Emanuele Mansueti of Hotelperformance

In my opinion there is a prospective that is not always – or almost never – taken into consideration: groups can represent a real opportunity to make an upscaling operation of your brand, going to catch operators who usually book higher categories hotels, which on that particular occasion decide to “test” different solutions, perhaps for reasons of availability or prices.

Another interesting aspect is the investigation you might do about the type of group to evaluate:

– flexibility: I have no place on the requested dates: can they change a step of their itinerary?

– The composition of the services that we offer: they can be modulated in various way, for example by decreasing the value of the room and, by compensation, increasing the value of a meal or a room or simply trying to sell services that were not initially envisaged.

– The rooms type to offer: in order to evaluate an upselling to superior rooms.

So, once you made the evaluation of the opportunity, the act of quotation cannot be separated from the act of the sales offer and for this reason, I have always insisted on the need for coordination between the Revenue, Sales and Reservations department trying to break down those communication barriers that sometimes arise between the different departments.

In the previous article we examined the room category taking the basic one as a reference: the evaluation of a group consisting of 2 Single, 20 double and 1 triple will be made on the double rooms, and for the other types selected by weighted deviations.

This system, even with its limits, may be suitable for those structures that do not have many types of rooms and concentrate their revenue management especially on a vertical type model, that is made with the movement of the BAR rates.

In some cases, however, the optimization of sales by type is an important part of the hotel strategy.

The data we must have in this case will be like those of the previous article but divided by room classes. At this point the rate will no longer be given by the simple multiplication of the number of rooms in the group by the BAR Rate, but those that will have to be upgraded will also be calculated.

In the example we see a request of 30 single rooms, while we only have 5 available. The other 25 will have to be upgraded, of which at least 20 in DBL and 5 in TPL. The calculation will therefore be given by the multiplication of the rooms available in Single for the relative Price in BAR added to the multiplication of the rooms that we will upgrade to DBL and to TPL for their relative BAR price, divided by the total number of rooms:

[(5*80)+(20*100)+(5*145)]/30 = 104,16€

Then we subtract the complimentary rooms (COMP) and we will get the revenue generated by the group with this quotation.

At this point we can use the simple Displacement Model to evaluate the impact that the rate of 104 euros, and the related total revenue generated by the group, will have on the sale:

The procedure is therefore analogous to that of the simplified Displacement, that is, the value of the group must be added to what we have already On The Book (OTB) and we will obtain a first sales scenario, the so-called whatif:

We then subtract the “what-if” from the Budget to obtain the sales residual

In this case the result of what-if ADR is slightly below the budget, so the system suggests to raise the price. The Revenue Manager is therefore called to make an evaluation, which in this case is whether or not to accept the quotation considering that the difference is minimal and there are still many rooms to sell

In this model, as in the simplified one, the public rate has still a central role. I reiterate this concept in that I would not like to pass the axiom that a group must necessarily have a discount on the rates dedicated to transients. In addition to the aforementioned factors affecting the sale and the perception of the customer, I remember that in any case the rate elaborated for the BAR must have already taken into consideration its optimization.

As you can see we went deeper into the analysis taking into consideration more aspects of the quality of the sale, in my next article we will go even more in detail by evaluating a group rate based on a budget by market segment and applying the placement rules and displacement.