Overbooked Hotel: what it is and how to avoid it

What is an overbooked hotel?

An overbooked hotel is a booking surplus.
To use the overbooking practice as a strategy to increase revenues, the analysis must be based on data regarding the booking history, like the no-show percentage by type of room, the ratio between cancellations and confirmed reservations or the potential walk-in. The aim is identifying a weak point or a repetitive scheme in which potential customers tend to cancel their reservation. The expectation of a voluntary overbooked hotel is that some guests might cancel their reservation or don’t show up, making the overbooking rooms available again and assuring the full coverage of your rooms.

Practicing controlled overbooking as a revenue management technique has some advantages:

• Reaching 100% occupancy more easily;
• Maximising profits (read also our article about the best hotel rates types and learn how to increase your revenue);
• Prepare eventual hotel overbooking compensation for guests, who are victims of overbooking. In particular, this scenario is advantageous only if you have concluded agreements with other accommodation facilities nearby, to be able to effectively reallocate guests at a lower cost.

What can you do if a hotel overbooks?

Overbooked hotel: legislation

The risk that expected cancellations might not take place and some guests might not find available their reserved rooms is the reason why overbooking is considered a controversial practice, unethical for consumers.

The hotel contract is not regulated by law but it’s based on fairness: the hotel manager, according to the price set, is committed to provide the customer with a furnished housing unit, in which the guest can stay, and other necessary or extra services.

Overbooked hotel: what to do

In case of default, the facility has to guarantee, at its own expense, a hotel overbooking compensation to its customers in an alternative accommodation, of the same level or higher and in the same place.

For this reason, as part of the overbooked hotel strategy, it’s important that the facility can count on a good partnership with nearby facilities to avoid bearing higher costs than expected.
Another non-negligible detail is training the staff to manage this eventuality from an organizational point of view, quickly finding a new accommodation and efficiently communicating with guests to avoid an escalation of negative reactions, bringing about more disadvantages than benefits.

In fact, in some cases, customers may decide not to accept the hotel overbooking compensation and legitimately ask for a refund of the deposit.

Despite some hotel managers considering overbooking as an excellent practice to maximize profits, even with a staff trained to manage these scenarios, one is not entirely safe from possible problems.

In fact, in an era in which your digital reputation is all, the possibility to receive negative reviews can undermine your online visibility on OTAs, ending up having a negative influence on the volume of reservations received (read how much doeas count reviews on Airbnb)

How to avoid an overbooked hotel?

As anticipated, an overbooked hotel is not always the result of a strategic commercial practice. There are cases in which a hotel finds itself in overbooking accidentally.

How?

Here is a scenario: if you manage a facility present on the most important booking portals, like Booking.com, Airbnb or Expedia, you might receive several reservations a day on different portals, and you might also have to update your availability manually everyday on other OTAs. In this way, you run the risk of overbooking, if you forget to close the availability on a certain portal.

Consequently, in light of what has been considered so far, the most effective strategy to increase reservations and manage them without the risk of registering an excess of bookings is using a two-way Channel Manager like Octorate’s one (learn here what is a Channel Manager)

Beside automatizing the management of the facility, it can also help you manage your online distribution channels, by automatically synchronizing the availability and tariffs on OTAs, completely avoiding the risk of hotel overbooking. Indeed, our Channel Manager provides hotel managers with ad hoc instruments to avoid overbooking. For example, the Autopilot constantly checks bookings received and available units, and prevents the calendar from showing a higher availability than the effective one.

The Channel Manager allows you to increase your profits and avoid overbooking, by easily managing everything from a single platform.

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