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Why an Overbooking Strategy Is Important

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Posted by Alex Gaggioli
March 18, 2016

In today’s age of complicated distribution networks, it’s not uncommon for a property to receive overbookings. Overbookings can be stressful, but with a proper plan, you can manage them with ease. You can sometimes turn overbookings into a positive situation.. A good strategy will increase your revenue and mitigate losses.  Here we’ll discuss how and why your property needs an overbooking strategy. Turn a headache into an advantageous situation.

How Overbookings Happen

Overbookings can occur for a hundred different reasons, but a couple are more common than others. Simultaneous bookings occur when two guests book the same room from different channels at the same time. A good channel manager refreshes every minute or so, leaving an unavoidable small window where multiple guests can book the same room. System setup errors are also common. All channel managers and individual channels require careful setup. If you miss a step or don’t include all of your rooms, it can cause mistakes.

We suggest that you always follow the setup guides provided by your property management system, channel manager, and the channel. Each channel needs to be mapped correctly in order to coordinate with your software and other channels.

Why You Need a Strategy Why-You-Need-A-Strategy

Overbookings are a stressful situation for you and the guest. Guests often see these situations as negative, so having a well laid out plan is important. If your property tries to manage overbookings without a strategy, it will lead to a negative financial impact. Alternatively, having an overbookings strategy will lead to a positive financial impact. Afterall, if you’re overbooked, that means your property is full.

If you successfully manage an overbooking, you will recover the guest’s satisfaction. Having an overbooking strategy can even help you steal market share. If your property is full and you can relocate a guest for one night and then bring them back to your property, you’ve stolen market share. If that guest had not successfully completed an overbooking, they would have booked at a competitor. Now you have the upper hand and can keep them as a customer.

How An Overbookings Strategy (or lack thereof) Impacts Your Finances:

Without a strategy, you’re always losing money when you have an overbooking. But, with a strategy you have the opportunity to increase revenue because you minimize the risk of no shows and cancellations. With a plan, you can fully book your hotel and minimize empty rooms.

How to Identify Overbookings

During your daily reporting, you should already monitor new reservations, cancelled reservations, and current availability. If you don’t, we suggest running nightly departure reports, arrival reports, and in-house reports to get a clear picture of your property. Then, take a look at the day’s incoming reservations and determine any problems.

The first step is to determine how many overbookings you have and figure out where they came from. Once you find their origin, make sure the channel is no longer open and susceptible to overbookings. After you determine that you have an overbooking, check how many cancellations you usually have for that time period. Sometimes, one or two overbookings won’t matter because of future cancellations.

How to Handle an Overbooking

Overbookings-can-be-made-a-positive-when-you-have-a-strategy-and-follow-it

If you have a true overbooking, meaning cancellations won’t cancel it out, create a list of local properties you can send the guest to. Make sure the properties are of similar value and quality. Many hotels will offer each other discounts in exchange for the same courtesy, so it pays off to have an overbookings plan in place ahead of time.

Take a tactical approach to decide which guest has to move. It’s not beneficial to move the last booked guest because not every guest is the same or worth the same amount of revenue. There are several factors you should consider before choosing the guest who needs to move. If you have a rewards program, look at their hotel status. Also look at how many times they’ve been to your property, and how much revenue they’re bringing. Guests with hotel status who stay at your property all the time probably won’t mind relocating if you incentivize them with rewards points. Guests who have never stayed at your property before are also good candidates to move because their expectations are lower. A loyal, returning guest knows exactly what your property offers and keeps coming back for more. If you decide to move them, you run the risk of interfering with their normal regime.

A guest who booked through an OTA and only brings you $90 in revenue is better to move than a guest who booked direct for $400. Take a look at all the different variables before you decide who needs to change their reservation.

Industry standard for overbooking compensation is usually one night’s stay plus transportation cost to the new property, according to our internal source. If the guest returns to the original hotel, they’re usually offered industry rate plus any available upgrades.

What to do if you’re not sure you need to move someone

More often than not, it’s going to be difficult to decide the best course of action too far in advance. If you don’t know if a guest needs to move, continue to monitor the situation. It is ideal to contact the guest before they arrive, but in some cases it won’t be possible. In the event that you need to a move a guest last minute, remember to show genuine care and empathy.

Create a Guest Recovery Plan

Create a guest recovery plan in the event that a guest has a multi-night stay and you move them for one night. When the guest returns, it gives you the perfect opportunity to wow and excite them. Guest recovery plans do not have to be expensive or lavish. Simple thoughtful actions are worth far more than expensive gifts.

Some examples include:

  • Hand-written note waiting in their room
  • Free bottle of wine
  • Rewards points
  • etc.

If you properly take care of your guests, it displays your property’s commitment to your partner hotels.  As a result, you will strengthen your relationship. Guests who experience an issue but receive an adequate resolution typically become your most loyal guests.

Conclusion

Overbookings are an unfortunate common occurrence for most properties, but with a proper plan you can. Create a plan and closely monitor any potential overbookings. A well-executed plan will help you turn overbookings into a positive revenue source, instead of a negative one.  You should do everything you can to avoid overbookings, but approach them with an opportunistic attitude.