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How to Manage Overbooking… Properly!
By Matt Shiells-Jones
I have written many an article that slanders overbooking and how detrimental this can be to a hotel's reputation. But there are some positives to it too... Let's bear in mind that an entire airline industry pretty much owes its multi-million pound booming successes to revenue management, which stemmed from the art of overbooking.
Airlines and hotels are different beasts with great similarities when it comes to overbooking, like non-identical twins. Take for example the overbooking of an aircraft - if everyone turns up in economy you can bump them up into business class, if necessary bump business into first class to do so. In hotels you can do the same thing - bump people up in to different rooms types. The issue with this in hotels is that by ‘bumping up' you erode all your upgrade revenue - I have seen hotels so drastically overbooked that you end up with no upgrade revenue at all, because everyone who went in an upgraded rom was bumped up free of charge!
Now if all your upgraded seats are taken in an aircraft, you can ask for volunteers to take the next flight. Usually these volunteers will receive accommodation whilst waiting, cash-in-hand compensation and an upgrade on the next flight (I actually know people who make a living out of volunteering like this... it truly is an art form!). With a hotel, you cannot ask a guest to stay on another date, nor can you start compensating with cash-in-hand for them. The best you can do is another ‘airline' option, of sending them to a competitor - generally this is a double-whammy as not only have you (usually) annoyed the guest, you have gleefully handed them like a freshly-wrapped gift to one of your direct competitors in the area, who now have the chance to really excel and make that guest a returning visitor, losing you loyalty, revenue and reputation!
But what if... lo and behold... there were a way to manage overbooking correctly, and be overbooked when it makes you money and not overbooked when you can't afford to be? Well, there is!
Overbooking is an art of fine-tuning your reservations and internal teams. You need several things to make overbooking a successful practice - just ask some of the front desk staff who have to deal with poor overbooking management and they will tell you tale after tale of guests screaming, crying, threatening, refusing to move and even punching staff because they have been out-booked (I still remember ducking to avoid a coffee table that flew across the reception at head height - that guy was out-booked to the police cells!). So here forthwith I shall dispense ye olde secrets of overbooking effectively - I have NEVER told anyone before about how I managed overbookings effectively, so please feel privileged as I dispense my common-sense guide and golden rules to overbooking properly!
Right - enough jabbering, but I think I have covered almost everything I can think of. I have always been honest with my dislike of overbooking, and have always been honest (in the most part) with guests who have been out booked - overbooking is a gamble, and you can never get it ‘exactly right' as that is an impossibility without a really good time machine/future predictor! I urge all revenue managers to spend one day with reception when the hotel is overbooked - you will see just how hard they work when dealing with moving people to alternate hotels. To give you an idea they have to:
All this usually whilst dealing with telephone queries, emails, in-house guests, general administration and the 100 other things that pop-up during a shift. The point I make here is that over booking is not just a statistic and should not be seen as such; it has a human impact on real people! You can make a lot of money if you overbook accurately, and can lose a lot if you overbook incorrectly.
About Matt Shiells-Jones
International hospitality writer, industry contributor and specialist; Author of ‘How to be a Hotel Receptionist' and the upcoming ‘Big Book of Hotel Standards', available on Amazon.co.uk. Publisher of www.chocolatepillow.com
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