The hotel industry is a revenue generated business whose profit normally streams mainly from guest room nights, but other areas in the hotel which generate revenue are meeting spaces, food and beverage, gift shop, spa services, etc. These different departments in a hotel go hand in hand, in that, rooms are a vital part of any hotel, if they are being sold and profit is maximized in that department, it is likely that the other departments would be utilized as well, as opposed to if the occupancy and a hotel was very low. The hospitality industry is unpredictable when it comes to forecasting real-time customer demand and profit maximization. The front desk staff often face difficult decisions when it comes to booking in groups of people, either to accept them or reject based on whether or not one group or transient will bring in more revenue than the other because they want to always maximize their revenue as a hotel. There are tools in place to aid in making these tough decisions; a spreadsheet is created with a displacement analysis to ease in this process.
Displacement Analysis Spreadsheet
Purpose of the Spreadsheet
The displacement analysis spreadsheet helps managers see if the hotel’s revenue is being maximized. With this spreadsheet managers can compare the revenue expected by a certain group. By doing this they will decide if they want to accept or reject that certain group reservation. If the group maximizes the hotel’s revenue then they will accept the group, but if not then they will reject it. A displacement analysis spreadsheet will include the differential in room revenue, differential in food and beverage revenue, and differential in other revenues such as meeting facility and spa services. As well the spreadsheet will include the capture rates of the different guests. With all this the hotel will have a summary of the final net revenue with the differential and will then decide if they should accept or reject the group.
Decision Making Tactics
Hotels have to make decisions regarding who they should take reservations for based on maximizing their revenue. When there are huge events happening in the city, for example the Scotiabank Toronto Caribbean Carnival Festival, which is an annual event that hosts hundreds of thousands of tourists from around the world, certain things must be taken onto consideration. If the hotel is located near the festival it would be very unlikely to book other group reservations at a discounted rate because the demand would be there for the standard rates. It would be an advantage for the hotel to book with this group because it is guaranteed revenue. Also, a group may generate revenue from other services at the hotel such as spa, meeting rooms or gift shop. The displacement analysis takes into account all the departments that generate revenue
The Larson Hotel is a 3 diamond full service hotel located in downtown Toronto in a prime tourist area. Just steps away from the financial district and the busy downtown core this is a flagship property for mid-scale travellers who cannot afford the high end hotel properties surrounding the area. With 250 spacious, newly renovated, modern guest rooms and 6 meeting rooms, covering over 8000 square ft. of space guests are sure to enjoy this hotel. The Larson Hotel also has a restaurant, serving breakfast, lunch and dinner, bar/lounge, gift shop, pool, and fitness centre.
On Friday April 20, 2012 Lucy Naples the Front Office Manager at the Larson Hotel is faced with a dilemma. At the last minute, a professional swim team coordinator called notifying her that competitors from all around the world are planning their annual competitive swim meet for women(ages 19-24) in two weeks’ time and were interested at staying at this hotel because it is where they have stayed in previous years. They would like to spend 2 nights, the exact nights being: Friday May 4th and Saturday May...