-Updated on 20th July 2022-
In other words, your room's vacancy had achieved 100% reservation. Overbooking for hotels is a revenue management strategy that helps to maximize the total capacity and increase the Room revenue.
Overbooking is a situation where your total room available reserve is less than the number of the room that had been booked for sales in the same period.
How does Overbooking Occur?
Overbooking is when your total room available reserve is less than the number of rooms that had been booked for sales in the same period. Overbooking is a common problem that happens in hotels if they are doing the daily operation task manually. It can maximize your profits and also cause you damage. Yet, overbooking is standard practice. As a hotelier, you need to sell all the rooms you have and maximize your revenue. The problem here is that some people will book and never show.
How to avoid Overbooking?
When there's a problem, there's a solution. The hotelier can avoid rooms overbooking in various ways. Below are the two solutions recommended for you to avoid overbooking.
1. Get a Channel Manager
The channel Manager act as a center manager that integrates all the OTA, when there is a booking from any one of the OTA, all of the booking details will send to the channel manager, then the channel manager will automatically make changes to other OTA.
Read also: Best Hotel Channel Manager List
2. Get a Property Management System (PMS)
A Property Management System (PMS) is also able to help to avoid overbooking. With PMS, you just need to record your booking with one click when you had received a booking from any of the OTA.
It is okay without any Channel Manager, but it is a must that owns a PMS. PMS is not only for record booking but also able to check room status, making a new reservation, generate a report, generating an invoice, and more. PMS is able to let you run a night audit, you can check for your arrival guest, departure guest, and in-house guest, this could help to identify overbooking before the guest had arrived at your hotel.
But it will be better and more effective to have the PMS integrated with Channel Manager. It will help you to update your price & allotment for all OTA platforms without multiple logins.
How to deal with Overbooking?
Once overbooking had confirmed and identified, which means the booking cannot cancel out, you are encouraged to perform the solution as below:
1. List out other properties as replacements nearby
You are encouraged to make a list of properties that are having similar value and quality nearby. Hence, you can suggest some replacement for your guest. Also, pay for their one night's stay plus transportation costs to the new property.
2. Tactic to decide which guest to be move
As a hotelier, you have to make a maximum profit for your business. It is not beneficial to move the last booked guest because not every guest is bringing the same value of worth to you. You should check as below:
- Guest Hotel Status, it is easier to move guests that book for the first time as they had not had much expectation.
- If you really have to move the guest who always stays in your hotel, you should give them incentives such as points(if you have a club card), discount, or free available upgrade on their next stay.
3. Check on guest booking sources
Also, check for guest booking sources. Guest who booked through an OTA that brings you lower revenue is more encouraged to move compared to the guest who booked directly which brings your more revenue. Always look for different variables before you make your decision to move any of the guests.
Read also: Tips for effectively Handling Guest Relocation When Hotel Is Overbooked
The Pros & Cons of Overbooking
Overbooking always seems like a negative from the guest's perspective, but it also has some pros for the hotelier.
Pros of Overbooking
- Helps hotel to achieve 100% occupancy
- Maximize expected revenue
- Optimized operation efficiency by increasing profitability
- Long-term revenue and profit increase
- Compensation is cheaper than leaving the room empty
- Low-risk method to increase profitability
- Chance of miscalculation decreases
Cons of Overbooking
- Do expect a guest review that may affect the reputation
- Additional financial loss as other guests stay in a hotel might use other hotel facilities
- Guests that move may have a negative thought about your hotel, so it is not suitable as a long-term strategy
- May receive negative reviews online such as on Tripadvisor and on Social media
- Guest may visit other competitor hotels for rooms
- An alternate arrangement for guests might be higher in cost
- Loss of hotel reputation
Overbooking cases happen in every hotel. It is a common issue but if you did not solve it properly and it happens regularly, will cause affect the brand reputation of your hotels. It will cause lost trust & loyalty from your guests and so it immediately affects your hotel booking revenue. Overbooking commonly happens when it comes to hotel daily tasks are all completed via human manually. This will save you cost, but you could not avoid any unnecessary human manual error occurring that causes missed updating the reservation, blocking the room calendar, and so on.
Getting a good hotel system helps you to do all your hotel's daily operation tasks in the system with a real-time update. It will save you a lot of time and also avoid unnecessary human error or mistakes happening and ultimately drives more bookings.
If you are looking for more information about OTAs, we do provide a free e-book about Guide to Online Travel Agencies. This e-book includes the pros & cons of using OTAs, popular OTAs among hoteliers, why hotel needs to be listed on OTAs, how to better manage your hotel sales channels, and others. Feel free to download them.