In order to fill as many hotel rooms as possible, hotels utilize the overbooking strategy. This means that hotels book more rooms than they actually have available in the hopes that not everyone will show up. This can be a beneficial strategy, but it also comes with great risk. In this article, we will discuss what the overbooking strategy is and how to mitigate the associated risks.
What Is The Hotel Overbooking Strategy?
The hotel overbooking strategy is when hotels book more rooms than they actually have available. This is done in the hopes that not everyone will show up and the hotel can sell the same room multiple times. It is also a strategy used to ensure every room is filled every single night.
This strategy is primarily utilized by using multiple booking channels. For example, a hotel may use a travel website, a corporate booking site, and their own individual website to sell rooms. This increases the chances that the hotel will sell every room that they have available.
Why Use The Overbooking Strategy For Your Hotel?
You probably realize by now how risky this strategy is. So, why would hotels use it? The answer is simple: because it works.
This strategy can be very beneficial for hotels if executed correctly. It allows hotels to fill every room they have available and maximize their profits. However, if not managed properly, the overbooking strategy can backfire and result in angry guests, bad press, and lost revenue. Here are some benefits to this strategy:
- Increased profits: This strategy allows hotels to sell the same room multiple times, which increases their profits.
- Increased ADR: Average Daily Rate is the average amount of money that a guest pays per night. The overbooking strategy can result in a higher ADR because hotels can sell the same room multiple times and sell all of their rooms every night.
- Full occupancy: This strategy ensures that every room in the hotel is full every night, which improves the hotel’s reputation.
- More bookings: Utilizing multiple booking channels (e.g. travel websites, corporate booking sites, etc.) increases the number of bookings a hotel receives.
How To Manage Overbooking
However, as mentioned, there are quite a few risks to this strategy. The primary risks include the hotel being overbooked and potentially losing customers in the process. In order to mitigate these risks, hotels need to have a plan in place for how to deal with overbooking.
Here are some tips for how to manage overbooking:
- Choose carefully which guests will be asked to relocate: When a hotel is overbooked, the first thing they need to do is figure out which guests can be relocated. It is important to choose carefully as some guests may be more understanding than others. For example, business travelers are usually more understanding than leisure travelers.
- Create partnerships with other hotel properties: This is a great way to mitigate the risk of overbooking. If a hotel knows they are going to be overbooked, they can partner with another hotel and send guests there. This way, the guests are still happy and the hotel doesn’t lose any business.
- Compensate guests who have to relocate: If a hotel does need to ask a guest to relocate, it is important to compensate them for their inconvenience. This can be done with a free night’s stay, a voucher for a future stay, or monetary compensation.
- Train your staff on how to provide great customer service to frustrated guests: This is one of the most important things a hotel can do. If a hotel is overbooked and needs to ask guests to relocate, the staff needs to be prepared to deal with the situation. They need to be able to provide great customer service and make sure the guests are taken care of.
- Monitor last-minute cancellations: These cancellations can help avoid overbooking while helping your hotel still earn some revenue. Keep an eye out for these cancellations so you don’t have to turn away guests.
Final Thoughts
Overbooking is a risky strategy, but if executed correctly, it can be very beneficial for hotels. It is important to have a plan in place for how to deal with overbooking, as well as how to provide great customer service to frustrated guests. If you follow these tips, you can avoid the pitfalls of overbooking and use this strategy to your advantage.