Displacement: what a group costs you in the guests it pushes out

A group that takes many rooms at an agreed rate brings something valuable: certainty. EHL Hospitality Business School says so, and adds the catch: on nights you would have filled anyway, the group may push out guests who would have paid the open price.

Displacement analysis is EHL's name for the formal check. It estimates the room revenue from individual guests you give up by taking the group, allows for the risk that the group takes fewer rooms than it holds, and compares the result with everything the group spends, food, drink and the hall included. EHL warns that hotels which take groups without it tend to commit too many rooms to groups.

• On a quiet night, displacement is close to nothing: rooms that would stay empty push out no one.
• On a busy night, every room the group takes may be a room you would have sold for more.
• On the nights either side, a group can push out guests who wanted a longer stay running through its dates.

1. 1Write down the nights the group wants, the rooms for each night, and the rate it is asking for.
2. 2For each night, forecast the rooms you would sell without the group, and at what average price. Use the night's pace against last year, the events in town and what the hotels around you charge.
3. 3Work out the rooms displaced: on each night, the rooms the group takes that you would otherwise have sold. If your forecast plus the group comes to more than your rooms, the difference is displaced.
4. 4Work out the displaced revenue: the displaced rooms times the price you forecast, plus what those guests would have spent on meals.
5. 5Work out the group's value: its rooms times its rate, plus the hall, meals, drinks and anything else it books, less what they cost you to serve, any commission to a planner or travel agent, and any rooms you give free.
6. 6Take the displaced revenue from the group's value. If what is left is above zero, the group earns you more than the guests it pushes out.
7. 7Allow for the group shrinking: work the sum out again with fewer rooms, as many as the contract lets it give back without paying.

Cornell University's course on displacement makes the same point about the second step: a hotel should estimate the future arrivals it would have to turn away for lack of rooms.

• Rooms, at the group's rate, for the nights it will really take them.
• The hall, the lawn or the meeting room, and anything the group pays for them.
• Meals, drinks, decoration and other services, counted at what they leave you after their cost, not at their price.
• Less any commission to a wedding planner, event company or travel agent who brought the group.
• Less any rooms you give free, such as one free room for a number of paid ones, if the group asks for it.
• Less the risk that the group gives rooms back late, which EHL calls attrition. A release date in the contract, after which unsold rooms come back to you, limits it.

EHL Hospitality Business School calls this the group's total contribution: what it brings across every part of the hotel, less the direct costs of hosting it and the room revenue it displaces.

• Offer quieter nights: the same group on the nights before or after a busy one may displace no one.
• Ask a higher rate for the busy night, and keep the agreed rate for the others.
• Offer fewer rooms on the busy night, and more on the quiet ones.
• Ask for a minimum spend on food and the hall, so the group's value covers the rooms it takes.
• Set a release date for unsold rooms, and take a deposit, so a group that shrinks leaves you time to sell the rooms.
• Say no politely when nothing works, and offer the next dates when you will need the business.

Booking.com lets a property with three or more rooms set a group policy for bookings above a number of rooms it chooses, from more than 2 rooms up to more than 10. The guest is told that different policies and additional supplements may apply, and Booking.com says the hotel should then contact the guest with its terms: the prepayment, the cancellation deadline and any cancellation charges.

1. 1Sign in to the Booking.com extranet.
2. 2Click the “Property” menu, then select “Reservation policies”.
3. 3Under “Other policies”, go to the “Group Reservations” section and click “Edit”.
4. 4Select “Yes” to offer a group policy, and set the number of rooms it starts from.