Time off hours are automatically "hidden" from project and phase hours when it is added over an assignment. To prevent this, be sure to create add a new person or placeholder and create an assignment for the time off hours being removed.
However, please note that placeholder hours are not included in the past- so this will work for forecasting only.
If you need these hours always excluded, do not use the time off feature. Instead:
Create an internal non-billable project called "Time Off".
Add a phase that end in the future to set the project start and end date.
Add all people.
Add time off in this project instead of time off.
You will then being able to see a conflict but it won't affect project hours.
On the Project Planner- the time off hours will appear as a conflict over the assignment with a pink line.
On the People planner- it will appear as a separate project:
