Overbooking

  
Overbooking

Overbooking is a practice of selling more rooms than there are available. This practice has originated with the airlines and not is common in the hotel business as well. Overbooking is necessary to achieve a perfect or a near perfect sellout (100% occupancy). 
Example:
Imagine you are running a 1,000 room hotel and you know that you can expect a 5 % no-show. You sell 1050 rooms. 50 guests do not show up as expected and you closed out with a perfect occupancy, Of course, sometimes things do not go as planned - rate of no-shows change, rooms get out of order, etc. 

To optimize your overbooking strategy here are the things to consider:
  • Cost of a walking a customer
  • Rate of a no-show by business segment
  • Is front desk properly trained/equipped in walking guests