what is overbooking?

Overbooking is a strategy where a hotel accepts more reservations than it has available rooms, anticipating cancellations or no-shows. This practice can help maximize occupancy rates and revenue, but it also carries the risk of having to turn away guests who arrive without a cancellation.

Here are some key aspects of overbooking:

  • Risk Management: Overbooking involves a calculated risk. Revenue managers must carefully assess the likelihood of cancellations and no-shows to minimize the risk of having to turn away guests.
  • Guest Satisfaction: Overbooking can negatively impact guest satisfaction if the hotel is unable to accommodate all guests who arrive. It’s important to have a plan in place to handle overbooking situations gracefully.

revenue management activities related to overbooking

  1. Cancellation History Analysis: Revenue managers can analyze historical cancellation data to estimate the likelihood of cancellations for different booking segments and time periods. This information helps them determine appropriate overbooking levels.
  2. Walk-Up Rate Analysis: Understanding the frequency and rate of walk-in guests can also help inform overbooking decisions. If the hotel frequently has walk-in guests, it may be able to afford to overbook slightly more.

By effectively managing overbooking, revenue managers can balance the goal of maximizing occupancy rates with the need to provide a positive guest experience.

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