A Decision Model for Hotel Revenue Management Displacement Analysisfor Transient Room Demand vs. Group Room Demand

Abstract

Revenue management in the hotel industry involves measuring the trade-off of revenue of one type of business over another type of business. One of the major decisions involves choosing revenues generated by transient (individual) room demand vs. revenue generated by group room demand. Traditionally, this decision was relatively straight forward as one would compare the ADR generated revenue for transient vs. group demand, and chose the type of business that maximized revenue. The decision model developed in this study shows there are many additional variables beside ADR generated revenue to consider with this business decision and trade-off of transient vs. group demand. Incorporated into this decision model are additional variables important to the decision like ancillary non-room revenue such as catering, food and beverage sale, meeting room rental, audio/visual services and other activities.