How to Avoid Overbooking Your Hotel
Overbooking your property — or selling more rooms for a given time than you have available — can happen for a variety of reasons. Sometimes, overbookings can result from holdover guests, or issues with room conditions that need remediation or repairs that simply aren’t possible on short notice. In other cases, overbooking can occur because the hotel advertises inventory through multiple channels and, when a booking is made, doesn’t update available rooms on the other sites quickly enough (or human error leads to a mistake).
Some larger hotels intentionally overbook their properties, anticipating that a certain percentage of reservations will be “no show” or late cancellations. However, this strategy can backfire, so the risks need to be weighed against the rewards.
Whatever the reasons for overbooking in hotels, the outcome can lead to frustrated front-desk staff; unanticipated (and unwelcome) expenses resulting from finding alternate accommodations for customers; and lost revenues in the short term. Of course, overbookings may also mean unhappy customers who take their reservations — and potentially their business’s reservations — elsewhere in the future, regardless of any compensation you offer. These impacted customers might also leave negative reviews online, potentially affecting your long-term revenue.
So, what can you do? Read on to find out how to avoid overbooking your hotel.
Ways to Avoid Overbooking Your Property
Obviously, it would be in your hotel’s best interest to sell out every night — perfectly matching the number of paid bookings to available rooms. So, trying to avoid overbookings by intentionally underbooking the property doesn’t make much sense as a solution. Fortunately, there are several tested strategies you can use to decrease the likelihood of overbooking — without underbooking and missing out on revenue opportunities.
Split Your Inventory Among OTAs
One nearly fool-proof way to avoid or reduce the risk of overbooking your hotel is to divide your inventory among online-travel agencies (OTAs) or other distribution channels. For example, you might allocate a certain number of rooms to Expedia, another grouping to Booking.com, and remaining inventory to Airbnb.
This approach avoids the problem of overbookings that occur when inventory isn’t updated quickly enough online because each distribution partner can only sell the rooms you’ve allocated to them. In other words, OTA number one cannot book the same rooms as OTA number two or three; so, the rooms can’t be overbooked. However, the one downside is that you could end up with more empty rooms than you want, because each distribution channel will likely not be able to sell all the rooms every night.
Plus, we love direct bookings, so giving all of your inventory to the OTAs exclusively wouldn’t be our suggestion!
Take Credit Card Deposits
Particularly for smaller hotels, no-shows and last-minute cancellations can be frustrating and expensive — especially if you thought you were booked to capacity. One way to limit this risk is to require a credit card deposit when reservations are made. We strongly recommend that all properties collect a deposit.
Guests are generally more likely to follow through on their reservations when they’ve paid a deposit ahead of time. How you structure your deposit is up to you. Charging the first nights’ stay or 50% of the total stay is most common. And if you’re going to offer rooms through third-party channels, such as OTAs, we would highly recommend requiring deposits because we tend to see higher cancellation rates amongst these guests versus those that book direct.
Implement Cancellation Policies/Cancellation Fees
Similarly, you may want to consider implementing and enforcing cancellation policies, with or without advance deposits (again, we strongly suggest you do collect a deposit of some kind). No matter what the details of your policy are, for it to work, guests need to provide credit card information when making their reservations and be advised of what happens if they cancel.
For example, your policy might state that they can cancel their reservations without penalty up until a specified date and time. Cancellations or failure to check in after that predetermined date and time would result in charging the card on file (often equal to one nights’ stay.)
Another option is to charge a nominal fee regardless of when they cancel - $25-50 could be enough to deter many people, while also covering any expenses you’ve already incurred related to the reservation. The fee would then be bumped up to the cost of a single night or even the full reservation depending on how close to the arrival date they cancel.
By implementing cancellation policies, you can get a more accurate picture of occupancy rates for any given night. This not only decreases the chances of overbooking your hotel, but it also decreases the risks that come with using intentional overbooking as a strategy to maximize occupancy rates.
Do your research and decide on a policy that you feel comfortable with and meets the needs of your business. There’s no one-size-fits-all approach when it comes to policies!
Be Proactive About Maintenance
As we said above, sometimes overbookings happen because of maintenance emergencies that make it impossible (and irresponsible) for you to check guests into a pre-booked room. While the nature of emergencies is that they can — and will — happen unexpectedly, you can decrease the chances of this type of overbooking by taking a proactive approach to maintaining the HVAC, plumbing, furniture, and electronics in each room.
Some property owners use their off-seasons to inspect rooms, conduct preventive maintenance, touch up paint, refresh linens, deep-clean carpets, and more. Creating a maintenance calendar can help you avoid the frustration that comes with equipment malfunctions or breakdowns, while also improving the hotel stay experience for your guests.
And having the calendar is great, but it won’t help if it’s not communicated to your team - especially the people handling room reservations. Make sure you have a way of blacking out rooms for maintenance, so they can’t be booked by guests directly or by your front desk staff handling phone calls.
Use Channel Manager Software
Another strategic approach to avoid overbooking your hotel is to use channel manager software. With a channel manager, you don’t need to split your rooms among your distribution partners and their affiliates only to have unsold rooms sitting with one provider. Instead, you can advertise all available rooms on each connected OTA, in addition to having available to book direct. Then, rather than having to manually update availability with each OTA when a booking is made, your channel manager can do it automatically and, ideally, in real-time.
In other words, when Guest A books a room through your website directly, Guest B, who is looking for rooms on an OTA site, will not be able to secure the same room that Guest A just reserved. That’s because the channel manager updated the listing automatically.
This strategy still allows you to control what rooms you make available and set the prices you want, using your pre-determined deposit and cancellation policies. However, you don’t have to deal with the stress of remembering to update your website and OTA partners each time you get a new reservation, freeing you and your staff to handle other tasks - like taking great care of those guests.
Keep Your Staff and Customers Happy
Overbooking your property can be stressful — for customers and for staff. If you can successfully eliminate (or at least significantly mitigate) the risks that come with selling more rooms than you have available, you shouldn’t need to devote a lot of time or energy to determining how to handle overbooking your property. To be sure, you should still have a plan in place for those unforeseen maintenance emergencies that make full occupancy out of the question. However, when you are proactive about avoiding overbookings, everybody wins.
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