Advantages and Disadvantages of Overbooking in Hotels

Overbooking is a situation where the booking of the rooms exceeds the available rooms of the
hotel in some specified time. It is a revenue generate a strategy that helps to maximize the total
capacity of the hotel.
While on the other hand, overbooking leads to long wait and problems for the guests result in
dissatisfaction with the clients and moving to another hotel for booking.
How to calculate optimum overbooking levels:
The calculation of optimum overbooking levels usually done after going through all the mention
below points:
 How many numbers of rooms available?
 How many confirmed reservations are there?
 Reservations made through credit card or guaranteed tickets
 Some expected cancellations of booked rooms.
 Days of staying or under stayed
 Any further booking of rooms
 Booking according to types of rooms
How to make adjustments in case of last-minute cancellations?
Overbooking is usually done through revenue management strategy, and it is done to adjusting
the revenue loss due to no shows or last-minute cancellations.
For example, in a perk season, you sold out all of your 50 rooms, and then later, the reserve
rooms got a cancellation or no shows. You face loss at your net revenue as no one does under
booking in perk seasons.
If you face such a case, then look at some overbooking practices. You already sold your 50
rooms due to high season demand. Now, we need to be careful and roughly estimated and also
keep some of the historical data of previous years for cancelations at last-minute cases. If you’re
predicted about five room cancellations, then sell another five rooms to make an adjustment for
revenue loss.
Meanwhile, if any guest cancels their booking, you still have more guests to fill in those rooms.
This is a way to protect your hotel from loss.
Advantages of Overbooking:
The following points can be included in some benefits of overbooking.
1. It helps to increase 100% occupancy against the guests got their reservation cancel or did
not come.
2. Overbooking can help you to maximize net revenue.

3. It helps you to increase your profitability ratio.
4. Overbooking gives you long term benefits in the form of long-term profit.
5. Overbooking is an old method to usually use to adjust revenue loss.
6. This strategy is widely used in hotel revenue management.
7. Chances of revenue loss will be decreased if overbooking is done by statistics history.
8. You can give the empty room to the next seller if got a cancellation.
9. Overbooking brings a considerable good impact rather than negative.
Disadvantages of Overbooking:
The following are the points of problems of overbooking.
1. Overbooking many leads to a bad experience for the hotel’s guests.
2. Having a bad experience is a good strategy in the long term.
3. Overbooking may affect your old and potential customers.
4. You may get negative reviews on the hotel's social media channels.
5. Your potential customers will be moved out to other hotels in case of overbooking.
6. Requires professionally trained and experienced staff to reduce the risk of miscalculation.
7. It can decrease your customer loyalty.
8. It can also cause your loss of hotel reputation and potential revenue.
9. You may face a high financial loss if your communication with guests is not in process.
10. All possible service recovery efforts should be followed.

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