No Vacancy: The Art of Overbooking

sorry no vacancy sign
Joshua Meehan
Joshua Meehan
December 17, 2014
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UPDATED:
December 6, 2019

One thing all hoteliers have in common is the desire to sell rooms. All of their marketing efforts are aimed at putting heads in beds and growing their revenue because room nights are a perishable commodity - every unoccupied room is revenue that cannot be made back. Even with enough reservations to fill a hotel, there are always last-minute cancellations or no-shows. Because of this, it’s common practice for hotels to oversell on busy nights purposefully. Of course, this may prove to be risky if everyone shows up, but perfecting the art of overbooking can be profitable.

A hotelier or revenue manager must know their average cancellation and no-show rate if they are going to oversell their property purposefully. This can help to gauge better the likelihood of actually being sold out. If a hotel takes a deposit to guarantee the first night’s room and tax, it’s possible to run over 100% occupancy for a night. Most modern property management systems allow for “mock” inventory. These rooms are incredibly useful for optimizing a hotel’s actual stock. Before running the nightly audit, any guaranteed reservations that haven’t arrived should be moved into these rooms and be included in the audit. Alternatively, auditors can manually post room and tax if this feature isn’t found on their PMS. It is important to note that if a hotel is going to oversell purposefully, they need to have very clearly written cancellation and no-show policies on their website and ideally have them included with their confirmation emails.

Unfortunately, overselling isn’t always planned. Unexpected stay overs or emergency maintenance issues and clerical errors can quickly drop a hotel’s inventory into the negative. In these situations, hotels will need to “walk their guests” and find new accommodations for them. This is never ideal since this means giving business to your competition. Still, the unforeseen can happen to them as well, so a working relationship between neighboring properties is always beneficial. Hoteliers should try to work out a walk rate with other hotels before actually needing them. Setting this up in advance can help to avoid being gouged when the rooms are required.

Since this isn’t a perfect system, a new company is stepping in to try to help. HotelOverbooking is still in its start-up phase but is developing an extranet for oversold hotels to list their guaranteed reservations on. This can not only help hotels looking to find a room for their displaced guests, but it can help bring extra revenue into hotels looking to sell out. Once their service is up and running, this site could be a new tool every hotelier needs at their disposal.

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