Mastering Overbooking in Hotels: Strategies, Benefits, and Best Practices

Mastering Overbooking in Hotels: Strategies, Benefits, and Best Practices

Kanha Gupta
Kanha Gupta

The hospitality industry is well acquainted with the concept of hotel overbooking. Although it is a  common practice in hotel management, it has been a matter of debate particularly because of the complications it brings during peak hours. When refusing customers becomes inevitable due to overbooking, it leads to poor customer experience and a negative brand image. However, in cases of last-minute cancellations, your profit is badly impacted. To combat this, hotel revenue managers devise an overbooking strategy that aims at profit maximization

What is overbooking in a hotel ?

Overbooking in hotels or double booking occurs when a hotel allows booking for more rooms than what is available on any given night. Hotels deliberately do this as a safety measure to avoid losses in case of any last-minute cancellations or no-shows. Overbooking can also happen accidentally when the inventory availability fails to update automatically and in real-time on some distribution channels. In this scenario, the bookings continue despite no availability of rooms.

However, with an effective overselling strategy, you can make the most of your revenue potential. 

Advantages of overbooking

A well-planned overbooking or overselling strategy for hotels is a cost-effective way to reap many financial benefits. Here are the most prominent benefits of overbooking:

  • Mitigating losses from cancellations - Overbooking helps reduce losses in case of last-minute cancellations. If a guest doesn’t show up on the check-in date, you can still fill in the room and receive the room rent from another guest if you had correctly anticipated the no-show and sold the room earlier. 

If you have a clarity on the approximate of last-minute cancellations, then it will help you make a logical decision with regard to total overbookings needed to eliminate all kinds of risks and losses.

  • Achieving full occupancy and maximizing revenue - With hotel overbooking, you have a full-proof plan to maximize your revenue. This is possible because all available rooms are booked to ensure full occupancy at all times. It also increases your profit margin. This is one of the crucial points to consider while devising overbooking policy in hotels. 
  • Cost effectiveness of compensating overbooked guests - Having overbooked guests is better than having empty rooms. You can always compensate your overbooked guests with alternative suggestions by helping them with a booking in a similar category hotel nearby. You can further leverage your customer service by arranging for a commutation service so that they can reach the alternative hotel without any hassle. In addition, you can maintain their loyalty by offering them discounts for future reservations. 
  • Utilizing technology and analytics software to predict and manage overbookings - With the availability of technology and analytics software, creating and executing an overbooking strategy is now a cakewalk. With proper integration of a hotel property management system, channel manager and revenue management system, you can easily predict and manage overbookings. 

Cumulative data can be used to predict the approx number of overbookings for maximum revenue. You must take into consideration factors such as seasonal cancellations, demographics, customer loyalty, overstays, etc. All this will help you get the closest estimate of overbookings. 

Crafting a successful overbooking strategy

As you embark on a journey of creating a winning hotel overbooking strategy, here are some ideas that you need to incorporate to create an effective plan to keep your business thriving while satisfying your guests with the best services.

Leveraging big data for accurate predictions

Take a look at your customer activities and reservations. This will help get a clear picture of the overbookings you can allow. This big data analysis will further aid in redirecting your overbooked customers with the ideal compensation scheme.

With critical analysis, you easily figure out the average cancellations you can expect in any season, along with the average number of walk-in clients to estimate the safe number of hotel overbookings you can allow. 

Maintain a detailed guest list and prioritize bookings

Prepare a check-in list that shows guests with guaranteed bookings and chances zero of no-shows. As for others, you need to ask them to guarantee their arrivals and only then their rooms will be confirmed. This scientific approach greatly helps to ensure booking accuracy and reduce customer agony.

Establish partnerships with nearby hotels

Eliminate last-minute frustration of your overbooked customers by partnering with neighboring hotels. Make sure that these hotels are of the same star category as yours so that your guest’s expectations are not compromised with. Anytime you have an overbooked guest arriving, you will have a ready option for them. 

Training staff to handle overbooking situations

Your staff needs to be equipped with the necessary skills to handle the complexities of hotel overbooking situations. They should know the set alternatives and compensations that need to be provided to guests. They should go an extra mile to facilitate seamless communication with relevant executives and arrange for transportation and sometimes even covering the expenses related to commuting to a nearby property. A successful hotel overbooking strategy is incomplete without a staff that is trained to handle hotel overbooking scenarios professionally and empathetically.

A successfully-implemented hotel overbooking strategy holds incredible significance in maximizing revenue and enhancing customer loyalty. With balanced occupancy rates and minimized impact of last-minute cancellations, you can achieve optimum profits. However, keep in mind that any strategy should not be set in stone. It needs to be continuously analyzed and adapted according to evolving market trends. This is highly crucial to attain a competitive edge.