Hotel Overbooking: 6 Ways to Boost Occupancy and Revenue

April 24, 2023
Hotel Overbooking: 6 Ways to Boost Occupancy and Revenue
Hotel Overbooking: 6 Ways to Boost Occupancy and Revenue

The term ‘hotel overbooking’ is often not received well by hoteliers. After all, it's a double-edged sword; if you're not skilled enough to wield it to your advantage, things could get out of hand at your hotel premises. While some hoteliers avoid overbooking, others see it as an opportunity to boost profits, escalate occupancy rates, and cut down on losses. It is often considered a necessary evil required to combat canceled reservations.If you are a hotel manager or hotel owner searching the internet for ways to turn overbooking to your advantage, then you are in the right place. This blog will help you understand the basic concept of overbooking in a hotel, its impact in terms of benefits and risks on your hotel, and how you can leverage it to your advantage.

What is Hotel Overbooking?

Hotel overbooking refers to a situation when multiple guests reserve the same room for the same date. More precisely, overbooking in the hotel industry occurs when there are more booked rooms than rooms available for sale over a given period.

In the hospitality industry, hotel overbookings can happen for a variety of reasons, such as:-

1. Displaying the rooms on too many Online Travel Agencies (OTAs), global distribution systems (GDS), or meta-search providers. Multiple people may book the same accommodation via any of these platforms because these platforms are visible to a huge audience.2. The other possible reason could be when a hotel is trying to update its room inventory on all the connected platforms, but some delay in the process leads to rate disparity. Due to the rate disparity, multiple people can book the same room at a low cost simultaneously.3. When guests don’t check out when they are supposed to leave or if a room becomes out of service due to maintenance issues.

What are the upsides of hotel overbooking?

Despite being a questionable hotel practice, overbooking, when done correctly, can turn out to be a cost-effective strategy. Let’s shed some light on the merits of leveraging your hotel overbooking.

1. Reduces the losses occurring from cancellations and no-shows

The main benefit of hotel overbooking is that it provides a backup in case someone doesn't show up or abruptly cancels the reservation beforehand. If this situation arises, then as a hotelier, you don’t have to worry about anything as you already have a guest lined up for that specific room.

2. Ensures higher occupancy and RevPAR (Revenue Per Average Room)

Hotel overbooking ensures that every room is filled in and is 100% occupied. If you have ensured 100% occupancy of your hotel rooms without offering any discounting rates, then overbooking ultimately escalates your RevPAR, maximizing the expected hotel revenue.

3. It is a low-risk strategy to maintain the continuous flow of funds

Hotel overbooking is frequently regarded as a low-risk strategy because it can be a manageable financial outlay. Even if a person changes or cancels a reservation, the other guest who placed a reservation for the same accommodation will still pay for it. If overbooking happens, the key to handling guests is to focus on a human-centric approach to interact with visitors and provide them with an alternative solution.

What are the risks associated with hotel overbooking?

Following our discussion of the numerous advantages of hotel overbooking, let's move on to understanding the risks of hotel overbooking with the help of an example.Let's imagine that you overbooked one room and gave keys to the room to the guest who arrived at the hotel first. The second visitor, who has likewise reserved the same room, now arrives at your hotel and requests to check-in. What will you do when faced with this challenging situation?

You can accommodate the guest in an available room or let them know there is an overbooking issue. Well, this might upset the guest, and he will likely leave a negative review about your hotel.

Therefore, if you overbook, you risk receiving bad publicity, providing negative guest experience and paying the OTA a commission regardless of whether the guest checked into the hotel.

Hence you lose not only your reputation but also your money!

What are the strategies to leverage hotel overbooking effectively?

We are aware that overbooking can be challenging, but it is vital to handle it carefully. Effective implementation of overbooking strategies can work to your advantage, or you run the risk of not only missing out on growing revenue but also losing your loyal guests.

Let’s look at some of the robust and effective strategies with which you can turn your hotel overbooking to your advantage.

1. Make informed predictions using Big Data.

Utilize big data to determine the number of permitted overbookings and the potential compensation you must pay to the visitors you were forced to turn away owing to 100% occupancy of the rooms. Use your hotel property management system software (PMS) for extensive data analysis. With the software you can forecast the average number of cancellations during a season and the typical number of walk-ins, allowing you to increase your capacity without turning away potential clients.

2. Staff should be well-trained to handle overbookings.

If a hotel is overbooked, a guest may experience frustration or disappointment if turned away when they arrive for check-in. To handle these situations effectively, it is essential to give the staff the necessary training. They can offer the guest alternatives and compensation, provide the guest with a way to contact the appropriate person in charge if necessary, and offer to pay for the guest's transportation to their alternative lodging.

3. Make a detailed list of guests who have confirmed their booking.

Create a detailed record of the visitors who have guaranteed their reservations on whichever day you intend to overbook. For those who haven't, remind them that their rooms aren't guaranteed as long as they haven't confirmed their presence. This tactic aids in knowing how many reservations are confirmed and how many overbookings you can make without encountering any problems.

4. Integrate the hotel channel manager on all your online platforms.

A channel manager is a piece of software that lets your hotel sell rooms across all linked direct and online booking channels at once. It will immediately update your real-time availability on all websites when:

1. A booking is made.2. A room is put up for sale.3. You want to make wholesale adjustments to your inventory.

This software ensures that the information about your rooms is the same and up-to-date on all online connected platforms such as OTAs, GDS or meta-search providers.

5. Set a limit on the maximum number of overbookings.

Imagine your front desk filled with many frustrated guests having nowhere to stay and asking you questions about being turned away at the last moment. This situation is manageable if the manager limits the maximum number of overbookings across their various booking channels to take place in a day.

6. Establish partnerships with same-star category hotels.

This is a very beneficial strategy to cope with the overbooking situation. Partnering with neighboring hotels allows you to have a reliable accommodation alternative for guests who didn’t get accommodation at your hotel. This way, the guest won’t feel cheated, and their loyalty towards your hotel will continue going on.

Partner up with hotels in the same star category as yours. This ensures guests get the same services from the alternative accommodation they had expected from your hotel. Since this partnership is both ways, when your partner hotel is going through overbooking, your hotel can also benefit. Thus, developing partnerships with the same star category neighboring hotels is a win-win strategy.

Conclusion

We hope that by the time you read this article's conclusion, you will better understand the advantages of hotel overbooking. Overbooking is a strategy that has maximized occupancy rates and overall revenue for years. If you are considering implementing an overbooking strategy for your hotel, then go for it. Let us know which hotel overbooking strategy was effective for your hotel.

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