Why is Hotel Overbooking Good for You? A Guide to the Upside

Hotel overbookings have a bad rap in the industry. After all, it is like a double-edged sword — if you’re not trained to leverage it to your advantage, then things may go haywire at your property.

One has to be strategic when turning that overbooking button on.

If you’re a hotel owner or manager and have been planning to use overbooking to your benefit, you’re at the right place.

This is not just going to be an article, but a complete guide on the nitty-gritty of overbookings, helping you add stars to your hoteliering practices.

What is Hotel Overbooking?

Overbooking in the hotel industry is when a single hotel room is booked by more than one guest for the same date. In other words, it is a situation when the total number of rooms booked for a certain period of time is greater than the total number of rooms available for sale.

One of the reasons for overbooking in hotels is that the property displays the same rooms on several OTAs and other online booking platforms. As the hotel and its offerings are learned about by a large number of travelers, it often happens that more than one looker books the same room from any of these platforms.

Another reason is that when a hotel manually changes/updates its room inventory on all the connected platforms, there’s a delay and also ends up causing rate disparity.

Why? 

Because you can’t be as fast as a flash, but the bookings can be.

How do Overbookings Impact your Hotel Business?

Imagine, a room was overbooked. One of the guests has arrived early and you have allotted him/her the room.

Now, the second guest who has also booked the same room has arrived at the front office and is asking to check-in.

What are you going to do, mi amigo?

If you have a similar room available, you can accommodate him/her. Or else, you have to inform them of the overbooked scenario. 

This may enrage your guest and s/he may go berserk about it. Worst still, you may get negative remarks about your services on the internet which would travel at the speed of light.

It is not an exclusive fact that one bad review can kill a hundred good feedbacks. That’s right, you are in trouble here.

Moreover, it will lead to the cancellation of the room booking; implying that even if the guest did not check in to your hotel, you’ll have to pay commissions to OTAs. 

That is a loss of both – revenue and reputation.

The Role of a Channel Manager in Dealing with Overbookings in Hotels

“How to handle overbooking in the hotel industry?” 

“How to avoid overbooking in a hotel?”

“How to deal with overbooking in a hotel?”

These are some of the popular search terms on Google and for all valid reasons. 

When I did my part of the research around it, I could see that hoteliers are actually curious to know the solution. 

Therefore, before we go ahead and talk about the overbooking practices in the hospitality industry, let’s first understand how a channel manager can come to the rescue.

When you’re dealing with multiple OTAs or online reservation platforms, the chances of acquiring overbookings are certainly higher.

To cope with this, it is imperative for your hotel to have a channel manager in place.

Let me explain how this works.

1. To start with, your existing hotel management system has to be integrated with a hotel channel manager.  
2. Next up, the integrated system must be connected to the online booking platforms to distribute your inventory effectively.
3. As soon as any one of these platforms receives the booking, this integrated channel manager quickly updates the availability everywhere in real-time and ferries the details on a single dashboard.
4. Moreover, once the rate is updated from the dashboard, it pushes the updated rates to all the connected channels. This particular two-way integration is called XML (extensible mark-up language) integration.

The channel manager does all of it automatically without you having to log in to each platform separately, saving both time and money; and of course, there are least chances of hotel overbookings.

Not to mention, it can also help you handle rate disparity. 

But Overbooking Is Also a Necessary Evil

Despite being tagged as taboo in the hospitality industry, it can’t be denied that overbooking is more of a necessary evil than an actual one.

Don’t believe me?

Let’s look at the merits of leveraging hotel overbooking.

What are the advantages of overbooking for a hotel?

1. Reduces your loss during last-minute cancellation

The major advantage of overbooking is that it offers a backup plan for canceled reservations. This means that if someone cancels their booking at the last moment, you don’t have to worry about any loss because you have another guest lined up for check-in.  

Bazinga!

2. Helps hotel to achieve 100% occupancy

The last thing a hotel would want is an empty room. And this is where a hotel overbooking strategy comes to the rescue. 

You may have to compensate, one way or the other, if you have an overbooked room. But it will ensure that your hotel achieves 100% occupancy despite the repercussions that may come with it.

After all, compensation for hotel overbooking is cheaper than leaving the room empty.

3. It is a low-risk method to keep the cash flowing 

Overbooking is considered to be a low-risk method to boost your hotel’s overall revenue. It doesn’t require a heavy investment where you might incur a loss. 

Rather, it requires a human-centric approach to dealing with guests and offering them a solution.

4. Maximize your hotel’s expected revenue

When you integrate overbooking into your revenue management strategies, your chances of earning better revenue increase significantly.

With this tactic in place, you can better analyze your cancellations based on statistics and reduce your chances of miscalculation. Meaning, you’ll always be prepared for all the unexpected hazy situations and give a boost to your revenue, whatsoever.

How to Use Overbooking the Right Way?

Now that you have learned about the benefits of overbooking, it’s time to understand how you, as a hotelier, can incorporate this into your hotel.

1. Leverage data to make informed predictions

Data is at the heart of any strategy and overbooking is no exception.

Now, what I mean by leveraging data is that you have to determine the patterns of cancellation and predict the chances of receiving more.

Based on your analysis and prediction, you have to come up with an overbooking strategy.

For example, after analyzing your past data, you could see that Fridays are less likely to receive any cancellations. Meaning, you might not want to plan any overbookings on Fridays.

So, let data be the epicenter of all your hotel’s strategies and make better decisions to reap better results.  

2. Have a detailed list of guests for the day you plan to overbook

Once you have started out with overbooking, the next thing you need to do is have a list of all the guests that are checking into your hotel for that particular day.

Check for the following type of guests:

• Repeat guests
• New guests
• Overbooked guests

This will help you prepare for the compensation you’re going to offer to each guest.

For example, if it’s a repeat guest, and considering your relationship with them, you might be able to convince them to shift to a new room in the hotel across the street.

Next up, try to check a few more factors such as length of stay, room type, the amount paid, etc.

This will help you to have a better conversation with your guests regarding your hotel’s overbooking scenario.

Simply put, it’s all about knowing what you’re going to offer the guests in case of overbooking.

3. Have partnerships with neighboring hotels

Whenever it comes to overbooking, your partner hotels are going to be your rescuer.

If you have multiple hotels in your locality or in a certain proximity, always form partnerships with them.

For example, Grande and Reigns are two properties in the same vicinity. The best thing about these properties is that they have a collaborative overbooking strategy. The day Grande allows overbooking, Reigns is there to back it up and let additional guests stay; and vice versa.

So, whenever you’re forming an alliance or partnering with a hotel, make it a win-win.  

4. Train staff on how to handle overbookings professionally

The way your hotel staff communicates is going to make a huge difference.

If the staff fails to assist the guests once they get to know that there’s overbooking, it is going to bring some bad reviews for your hotel.

Train your staff on how to communicate and explain to the guest(s) that the room they booked was overbooked and how common it is when the bookings are carried out on online platforms.

Further, propose an alternate solution very calmly. For instance, you can offer them an upgraded room in a nearby hotel. Or, you can also consider offering them your facilities for free and make their experience better.

Now, even if the alternate solutions are intriguing, if your staff lacks professionalism, then your guests are sure to get furious.

5. Take a tactical approach to decide which guest to move

In the second point, I talked about creating a detailed list of guests.

Here also you can use that list to make better decisions. Based on the type of guest, room type, length of stay, and all the other factors, you have to decide which guest to move.

For instance, there’s this guest who has come with his entire family for a 3-day vacation. And there’s another guest who is checking out the very next morning.

Which guest would you move?

Honestly, if I was in your shoes, I would move the solo gentleman who has come for an overnight stay. Additionally, I would ensure that he gets a good room with all the facilities in the hotel I am moving him to.

6. Have a guest recovery plan in place

Imagine you failed to retain a guest, s/he leaves your property furiously and ends up writing a bad review.

What would you do in that case?

If I was a hotelier, I would reach out to the guest and offer a free stay with meals included. It would be my gesture to make up for the inconvenience.

Sounds like a plan?

Well, that’s how you create a guest recovery plan. And take it from me, it works most of the time.  

Additionally, you already have a bad review, and even if the guest doesn’t agree to your offers, you have nothing to lose.

Things to keep in mind while incorporating overbooking

Overbooking is an extremely tricky affair. For everything to work well or inline, it is imperative to not leave a single stone unturned.

Let’s look at some of the factors to mull over before incorporating overbooking.

1. Do not overdo this strategy

Before anything else, you must understand the fact that you cannot overdo it.

Overbooking has to be done keeping your execution, compensation, and guest recovery plan in mind. Practicing overbooking every now and then would create a haywire situation at your property and dampen the brand image.

2. Use a reliable and robust channel management system 

A channel manager is a must-have for hotels while working with OTAs and dealing with overbookings. However, it is crucial to pick the right channel manager to do the job.

Here’s a guide that will help you with just that.

3. Keep communication with your guests clear

When you see an overbooked situation, ensure that you are communicating the situation clearly and offering a legitimate resolution. You can even reach out to your guests a day or two before to check if they are flexible with the dates. This helps you prepare better.

4. Hire a revenue manager

Revenue management is a game-changer for hotels. A proper revenue management strategy can bring significant profit to your hotel business.

So, when you’re turning to strategies like overbooking, it is important to work with or hire revenue management professional. Take it from me, the value you’re going to get is just immense.