Overbooking was once a problem caused by glitches in automated booking technology—but these days, it’s become not only an opportunity that technology presents, but a pillar of smart hotel management.
In the quest to reach 100% nightly occupancy, and generate as much revenue as possible, hotels now purposely book more reservations than they can actually accommodate. But how do they know how much to overbook, and when, in order to maximize their profits without causing a scene at the front desk?
A successful overbooking strategy requires hotels to accurately predict how many guests will cancel on any given night. They also have to be prepared to manage situations where the forecasted numbers don’t line up, and the hotel ends up with more guests than the number of rooms available. So how exactly do they do that? They need a combination of historical data analysis, a clear overview of local market forces and a step-by-step guide to solutions should overbooking issues arise.
Big hotels have it down to a science, but the good news is that even if you’re not part of a chain, you can build a solid overbooking strategy—one that will help you hit that 100% occupancy you’ve been seeking. Here’s how.
Let Technology Do the Heavy Lifting
Hotel conglomerates don’t rely on an army of analysts to predict how many guests will cancel. Instead, they use technology that can quickly comb through years of reservation data and make educated predictions about who will cancel and when. A modern PMS can run these calculations automatically based on the best available data, giving independent hotels the same data on their customers as major chains.
Refine Your Reservation System
Since the number of rooms a hotel chooses to overbook is based on data, that database needs to be as complete as possible. It has to cover not only how many people cancel on a nightly basis, but also how many check out early, book last minute or spend big on upsell offers. What conferences in town might affect how long a guest stays? What about weather, holidays and other major events? In general, more data leads to better predictions, which is why big hotels have such strong overbooking strategies. However, it doesn’t take a global footprint to begin collecting better data from more guests. Start with your booking engine and add additional data sources if and when they become available.
Accommodate Overbooks Proactively
Even the best overbooking strategy will occasionally result in a booking that a hotel can’t fulfill. When a guest is turned away despite having made a reservation, hoteliers need to offer more than an apology. They should be ready to move the guest to a comparable hotel (a practice known as “walking”), even if that hotel is a direct competitor. Big chains have the advantage of being able to walk customers to another location in their family, but there’s no reason independent hotels can’t offer the same level of service. Partnering with other local hotels makes this situation easier for both properties, and building those relationships in advance leads to a smooth experience for the walked guest.
Know Your Guests
An overbooking strategy can quickly go off the rails if guests are treated like anonymous numbers. When it comes time to decide which guest to walk, don’t just pick the person who made the booking last; instead, use the information you’ve compiled about the guest to anticipate whether they will react poorly to being walked. Generally, guests who are staying at the hotel for multiple nights, families and VIPs are all off limits.
Here’s an example of how a data-driven strategy should play into a walking decision: A hotel’s most loyal and lucrative guest inquires about a last-minute booking, but the hotel is fully booked. Another guest is booked for a single night in a comparable room. Instead of turning away the VIP, the hotel asks the original guest if they would be willing to move to another hotel, at no expense to them. It costs the property a small upfront cost, but it returns more revenue in the long run by maintaining the loyalty of a high-value, repeat customer.
Overbooking requires many considerations that might not show up in the topline facts and figures, so having in-depth guest data (including qualitative behavioural information) is invaluable. Hotels that leverage data and streamlined walking strategies can make sure that the rewards of overbooking far outweigh the risks. Developing an effective overbooking strategy may seem daunting or even dangerous at first, but the potential bottom line revenue makes overbooking worthwhile for small, independent properties. By starting with the data points available to them, determining the level of risk they can take on and committing to a careful and consistent walking process, overbooking can help to make this year their most lucrative one yet.
RoomKeyPMS brings the capabilities of big hotels to everyone in the hospitality industry. Use our PMS technology to drive revenue, cut costs, and improve across the board. Contact us at your convenience.
Photo Credits: Shutterstock / Peerayut Chan