What is the definition of Overbooking in the hotel industry?
Sometimes it can be essential for a hotel to sell more rooms than it really has accessible. To those unknown with the interior workings of the Hospitality Industry, which is always prejudiced by and somewhat susceptible to the vicissitudes of the global financial climate, that may sounds odd. But experienced hoteliers will tell you that selling rooms/spaces that you don’t have – Overbooking – can sometimes be the only way to defend a hotel from diminished income due to unforeseen cancellations, no-shows or booking errors.
A hotel needs to arrive at 100% occupancy for obtaining the highest sum of revenue.
Hotels will compute based on historical trends how much they can overbook the hotel to reach an ideal sell out.
For example a 100 room hotel, might require to sell 103 room, to be 100% engaged in the end.
Unfortunately, working with figures, means that you are using trends and averages. The result can vary, meaning that at times you will fall short of the 100% occupancy, and sometimes you will have additional visitors than rooms.
For all these causes, including an Overbooking policy in a hotel’s on the whole pricing and reservations strategy requires consideration and caution. Careless accomplishment could cause irreparable harm, but a well-managed Overbooking process could mean that a hotel’s profits are maximized year after year.