Hotel Overbooking: Advantages, Disadvantages & Process

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  • 0:03 What Is Hotel Overbooking?
  • 1:17 Strategy and Resolving Issues
  • 2:34 Advantages and Disadvantages
  • 3:26 Lesson Summary
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Lesson Transcript
Instructor: Morgan Gannarelli
In this lesson, we'll discuss hotel overbooking, as well as its problems and solutions. We'll also compare the advantages and disadvantages of overbooking in the hotel industry.

What Is Hotel Overbooking?

Have you ever checked into a hotel room after making a reservation to find out that they have overbooked rooms? This can be very frustrating for the guests, but there is a reason that hotels do this. Unlike airlines, with hotels you can often cancel your reservation within 24 hours of the date without being charged a cancellation fee. Hotels know that there is a possibility of a booked room being cancelled, and then that leaves them with open rooms that would have been making money. This is why hotels will overbook; they're trying to make sure every room is occupied each night and maximize revenues.

Sometimes overbooking is also referred to as walking a guest. Typically, in the event of an overbooking, the hotel will find you a room at another hotel and cover the cost of the stay. Sometimes hotel rooms are overbooked due to the different channels that guests use to book their rooms.

For example, you may have two guests booking a room at the same time from different websites. However, there's only one room available and, with the timing of the submission, the room may get booked by two different people. In this common scenario, it is very important to have an overbooking strategy in order to avoid any negative financial impacts or feedback.

Strategy and Resolving Issues

The reason that most hotels use an overbooking strategy is to maximize profits. If you have empty rooms, you're losing money. While overbooking seems risky, it is a necessary part of hotel management. The most profitable hotels use overbooking strategies. To do this successfully, you will first need to analyze your cancellation and no-show rates. You need to look at your reservation data that shows the number of cancellations before the arrival date. This will allow you to determine how many rooms you can overbook.

Once you have determined how many rooms you are able to overbook, you need to find out how much it would cost to walk a guest. This is the costs associated with finding your guest another room at a different hotel. It's important to have a list of partner hotels and their rates when you need to walk a guest to make the transition as smooth as possible.

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