Overbooking, How To Solve, Pros and Cons?

Overbooking is a situation where your total room available reserve is less than the number of the room had been book for sales on the same period.

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.

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How Overbooking Occur?

Overbooking is where your total room available reserve is less than the number of rooms that had been book 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 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 recommend for you to avoid overbooking.

1. Get a Channel Manager

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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.

2. Get a Property Management System (PMS)

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A Property Management System (PMS) 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, make a new reservation, generate a report, generate an invoice, and more. PMS 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 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?

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Once overbooking had confirmed and identified, which mean the booking cannot cancel out, you are encouraged to perform the solution as below:

 

  • List out other properties as replacement 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 cost to the new property.

 

  • 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 more easier to move guest that book for the first time as they had not 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.

 

  • Check on guest booking sources

Also, check for guest booking sources. Guest who booked through an OTA that brings you lower revenue is more encourage 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.

 

The Pros & Cons of Overbooking

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Overbooking always seems like a negative on guest 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 increase profitability
  • Long-term revenue and profit increase
  • Compensation is cheaper than leaving the room empty
  • Low-risk method to increase profitability
  • Chance of miscalculation decrease

Cons of Overbooking

  • Do expect for guest review that may affect the reputation
  • Additional financial loss as other guest 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 Tripadvisor and Social media
  • Guest may visit other competitor hotels for rooms
  • An alternate arrangement for guests might be higher in cost.
  • Loss of hotel reputation

 

Conclusions

Overbooking cases happens in every hotel. It is a common issue but if you did not solve it properly and it happens regularly, will cause an effect on the brand reputation of your hotels. It will cause lost trust & loyalty from your guests and so it immediately affect 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 occur that cause missed updated the reservation, blocking the room calendar, and so on. With getting a good hotel system, it helps you to do all your hotel daily operation task in the system with a real-time update. It will save you a lot of time and also avoid unnecessary human error or mistaken happened and ultimately drives more bookings. 

You're reading a blog compiled by Softinn. We're a hotel-technology company with the mission to make hotelier work easier. Do subscribe if you enjoy reading our blog or you may interact with us on our Facebook Page.

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