The playoff between transient and group business can sometimes feel like a never-ending battle, but what’s the best option for your hotel? Discover the benefits of both segments, two key considerations for your business, and advice from our team of experts.
What is group and transient business?
Group business is made up of guests looking to book multiple rooms at once. This can be people looking to book a block of rooms to large corporate, tour, or event groups that require more.
In contrast, transient business consists of corporate and leisure guests looking for short and last-minute hotel stays.
Benefits of group business
- Fill low-demand periods as rooms are needed all year.
- Generate regular and predictable revenue, making it easier to forecast.
- Result in fewer cancellations as bookings are contracted with cancellation clauses.
- Often require additional services such as catering or meeting rooms.
- Are cheaper to acquire as fewer people are involved in the booking.
Benefits of transient business
- Achieve a higher average daily rate (ADR) as bookings are typically made at the last minute.
- Greater number of transient bookings compared to group business
- Helps yield the last remaining inventory at higher rates.
- More flexible in terms of room allocations, as guests will take what is available.
- Builds loyalty, especially with business guests.
Two key considerations
1. Work out what’s important for your hotel
Knowing what you want to achieve as a business is essential and will help you determine what type of guest you want to attract:
- Is occupancy your number one goal?
- Do you want the security of guaranteed income?
- Are you looking to maximize your revenue?
- Is ancillary spend critical to success?
2. Complete a displacement analysis
It all boils down to displacement analysis - a calculation of the value of group bookings vs transient bookings - by accepting one segment over another, what revenue are you bringing in? And what are you turning away? If you wait for transient bookings, is there an opportunity to sell rooms at a higher rate as demand increases? Or, are you running the risk of losing out on a guaranteed group income?
In your calculations, be sure to consider room rates and total guest value, factoring in food and beverage, meeting rooms, outlet spending, and other ancillaries. Based on the results, you can then decide if you should accept a group booking request.
Here are some example outcomes:
- If the projected value of a displaced transient booking is more than a group business booking, you would want to reject the group business.
- If the value of a displaced group business booking is more than projected transient bookings, you would want to accept the group.
Our advice
"If you have a small room capacity, you may want to be more careful when accepting group business, as your inventory is typically dedicated to transient guests. But, if you have a good understanding of guest stay patterns (arrival dates, departure dates, LOS, etc.), rates, ancillary, and relationships, groups could make perfect sense."
Cornelio Encarnacion, Associate Director of Customer Success, LATAM
"It’s all about understanding your demand. If you get a group booking and you’re at low occupancy, but you know there isn’t demand for the period requested, then group business makes sense. But, if you don’t know the demand yet, your transient bookings could come in later, and you might have the opportunity to increase your rates and your revenue."
Laura Leser, Senior Customer Success Manager, EMEA
"It depends on your outlets. For example, if you sold a room for $100 to transient or group guests, who would spend more holistically in your hotel? Would a transient guest be more likely to have dinner in the hotel restaurant? If so, they would be the better choice for your revenue."
Tomos Jones, Senior Customer Success Manager, EMEA
So, which segment is better?
It all depends on your business and what you want to achieve. For some hotels, the security of group income outweighs the potential revenue generated from transient bookings. But, some hotels prefer to wait and see, basing decisions on their forecast and the potential to increase rates and associated ancillary spend.
The biggest takeaway is to consider a mix of group and transient business. Leveraging on both types of bookings helps mitigate the risks associated with seasonality, market fluctuation, and operational demands, while also bringing in a steady revenue stream. Focusing on just one could mean a huge missed revenue opportunity.
