Overbooking is a situation where your total room available reserve are less than the number of room had been book for sales on the same period.In other words, your rooms vacancy had achieve the 100% reservation. Overbooking for hotels is a revenue management strategy that helps to maximize the total capacity and increase the Room revenue.
How Overbooking Occur?
Overbooking is where your total room available reserve are less than the number of room had been book for sales on the same period. Overbooking is a common problem happens in hotels if they are doing the daily operation task manually. It can maximize your profits also cause you damage. Yet, overbooking is a 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. Hotelier can avoid rooms overbooking in various way. Below are the two solution recommend for you to avoid overbooking.
1. Get a Channel Manager
Channel Manager act as a center manager that integrate all the OTA, when there is a booking from any one of the OTA, all of the booking details will send to channel manager, then the channel manager will automatically make changes to other OTA.
2. Get a Property Management System (PMS)
A Property Management System (PMS) also able help to avoid overbooking. With PMS, you just need to record your booking with a click when you had received booking from any of the OTA.
It is okay without any Channel Manager, but it is a must that own a PMS. PMS is not only for record booking but also able to check room status, make new reservation, generate report, generate invoice and more. PMS able to let you run 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 arrive to your hotel.
But it will be better and effective to have the PMS integrated with Channel Manager. It will helps you to update your price & allotment for all OTA platforms without multiple logins.
How to deal with Overbooking?
Once overbooking had confirm and identified, which mean the booking cannot be cancel it out, you are encourage to perform the solution as below:
List out other properties as replacement nearby
You are encourage to list a list of properties that are having the similar value and quality nearby, so that you able to 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 to your business. It is not beneficial to move the last booked guest because not every guest are 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 no much expectation.
- If you really have to move the guest who always stay in you hotel, you should give them incentive such as points(if you have 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 bring you lower revenue are more encourage to move compare to guest who booked directly which bring your more revenue. Always look for different variables before you make your decision to move any of the guest.
The Pros & Cons of Overbooking
Overbooking always seem like a negative on guest perspective, but it also have 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 are cheaper than leaving room empty
- Low risk method to increase profitability
- Chance of miscalculation decrease
Cons of Overbooking
- Do expect for guest review that may affect reputation
- Additional financial loss as other guest stay in hotel might used other hotel facilities
- Guests be move may have negative thought about your hotel, so it is not suitable as a long term strategy
- May receive negative review online such as Tripadvisor and Social media
- Guest may visit other competitor hotel for rooms
- Alternate arrangement for guest might be higher in cost.
- Loss of hotel reputation
Overbooking cases happens on every hotels. It is common issue but if you did not solve it properly and it happens regularly, will cause an affect on the brand reputation of your hotels. It will cause of lose trust & loyalty from your guests and so it immediately affect on your hotel booking revenue. Overbooking common happens when it comes to hotel daily task are all completed via human manually. With this will save you cost, but you could not avoid any unnecessary human manual error occur that it cause of missed updated the reservation, blocking 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 real time update. It will save you a lot of time and also avoid the unnecessary human error or mistaken happened and ultimately drives more bookings.
With a mission to make hotelier work easier, Softinn Solutions Sdn. Bhd. is a hotel-technology provider company offering hotel management software. Ranging from cloud-based hotel PMS, hotel booking engine, and a specially customized hotel website; Softinn is adept in employing innovative ideas in its solutions constantly and understanding the requirements of hotel industry worldwide.