What to do in case of overbooking at the hotel

Dear WuBookers, today we are addressing a topic of great interest to both hoteliers and customers: rooms overbooked. We will talk about it from the point of view of the accommodation, trying to understand which tools to adopt to limit potential problems.

What an overbooking is

“Overbooking” is a very common practice in air lines bookings and sometimes also used in the hospitality industry. It consists in the possibility of selling more rooms (in the case of hotels) than are actually available for a given date. Overbookings can be allowed by hotel managers, in order to protect themselves from cancellations historically expected on a certain date.

What happens in case of overbooking

Overbooking is an event without specific legislation. However, this does not relieve hotel managers of possible responsibilities deriving from generic legislation and private contracts, such as cancellation policies.

In Italy, for example, a hotelier that receives an overbooked reservation and has a customer left without a room in front of him, must provide an accomodation of the same level as what was actually booked, in accordance with Articles 1175 and 1375 of the Italian Civil Code. The customer, having received the new offer, may decide to accept the replacement offered, or may refuse it, obtaining a refund of the deposit paid.

Is it possible to make money with overbookings?

From the guest’s point of view, overbooking can be a solvable incident, as long as he receive adequate or higher compensation than the accomodation booked.

But for hoteliers, can this also be a profitable practice?

If a very large structure, such as a hotel chain, plans to receive overbookings, this can make sense, because alternative solutions will most likely be available. For example, the hotel manager can offer the customer a better room at the same price or move the customer to a nearby property of the same chain.

This practice, however, is in our opinion to be avoided for medium/small businesses, that base their reputation on the relationship of trust and family with their guests.

Advantages and disadvantages of overbooking

That being said, here are the advantages that a hotel can derive from the practice of overbooking:

• Maximize Revenue and Profits;
• Achieve, as much as possible, 100% occupancy, compensating for cancellations and customers who do not show up;
• Optimize management costs by ensuring the sale of all rooms.

Here, however, the disadvantages to which we must pay close attention:

• Risk of not meeting customer expectations with a possible increase in negative reviews;
• Risk of having to return paid deposit;
• Possibility of having to incur in high costs to find adequate alternative solutions;
• Loss of possible walk-in revenue. Walk-in is the technical term that industry workers give to passing travelers.

It is good to know that…

Being aware of this, if a hotelier wants to use this technique, he must take into consideration various elements such as:

• The number of availabel rooms;
• The ratio between no-show/cancellation and confirmed reservations, based on the analysis of previous years data;
• The ratio between no-show/cancellation and reservations guaranteed with a deposit or credit card, again on the basis of a historical data analysis;
• The number of possible cancellations, always on a historical basis;
• The average duration of the expected bookings;
• Potentials walk-in;
• The number of overbooking based on the type of room.

Avoid overbookings thanks to the Channel Manager

However, even a prudent hotelier, who prefers to balance cancellations with walk-ins and last minute bookings and does not want to decrease his reputation, risks receiving unwanted overbookings: this risk is taken when his rooms are on sale, simultaneously on multiple channels. For example: on property website, on many On Line Travel Agencies (OTA), and at the same time, he can also take reservations over the phone with direct customers or physical agencies.

In this case, a technological tool can be used to reduce the risk of unwanted overbooking to practically zero: a Channel Manager. The Channel Manager is technological tool, with which it is possible to easily and simultaneously manage the offer and sale of rooms in an accommodation facility, from multiple booking platforms.

The Channel Manager is able to update, almost in real time and automatically, the availability of rooms or apartments on all the sales platforms to which it is connected. When someone books a room, the Channel Manager updates availability on all websites, whether it’s their sales site, an OTA or a Metasearch.  In this way, all risks due to delays associated with manual interventions will be avoided.