If you manage revenue for a 100+ room hotel, group business can feel like a win… until it quietly costs you money. That’s where displacement comes in. Displacement helps you answer one simple question:
Will this group booking replace higher-paying business I could have sold later?
NB: This is an article from TakeUp
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What Is Displacement (And Why It Matters)?
Displacement happens when a group booking takes up rooms you could have sold at a higher rate to other guests.
For large hotels, this matters because:
- Groups can fill a big block of inventory quickly
- Peak nights often sell out without discounts
- One underpriced group can reduce total revenue by thousands
Displacement is not about avoiding groups. It’s about pricing them correctly.
Think of it like this:
A group isn’t “good business” just because it brings volume. It’s good business if it brings more revenue than your other options.
A Simple Displacement Framework for Group Pricing
You don’t need complex math to make a good displacement decision.
Here’s a practical framework you can use today.
Step 1: Start With the Group Offer
Ask:
- How many rooms do they want?
- What rate are they offering?
- Which nights are included?
Example:
- 40 rooms
- $180 per night
- Friday and Saturday
Group revenue:
40 rooms × $180 = $7,200 per night
Step 2: Estimate What You Would Sell Without the Group
Now ask:
If I don’t take this group, what would I sell those rooms for?
Look at your expected transient rate.
Example:
- Forecasted transient ADR: $260
- Expected occupancy without group: 92%
If those 40 rooms would likely sell at $260:
40 × $260 = $10,400 per night
Step 3: Calculate the Displacement Cost
Displacement cost is the revenue you give up.
$10,400 (transient)
– $7,200 (group)
= $3,200 displaced per night
That’s real revenue leakage.
Step 4: Decide the Right Move
You have three options:
- Accept the group if it’s low demand
- Reject the group if it displaces peak revenue
- Reprice the group to cover displacement
In this example, the group rate would need to be closer to $260 to make sense.
