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.
NB: This is an article from RoomPriceGenie, one of our Expert Partners
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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.
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.
