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effective_overbooking_strategy

6 Tips For an Effective Overbooking Strategy

When done right, overbooking is your best asset. Done wrong – it can become a hotel nightmare!

hotel marketing tipsAn overbooking strategy is essential for hotels in this day and age. It keeps your rooms full, your income flowing in and minimises the impact of your off-season lulls. As guests inevitably cancel, the trick is to overbook just the right amount.

But how much should you overbook your hotel?

Well that’s what we’re here to help with. Our experience with hotels has taught us that an overbooking strategy that increases your revenue management plays straight into your hotel marketing.

So let’s work out how to build an effective overbooking strategy.


Why Do Hotels Need an Overbooking Strategy?

The Benefits of an Overbooking Strategy

The Dangers of Overbooking

Tips to Build an Effective Overbooking Strategy

Build Your Effective Overbooking Strategy


Why Do Hotels Need an Overbooking Strategy?

Firstly, an overbooking strategy makes sense. 

If your rooms are empty, they aren’t generating any income. Your staff aren’t needed as much and your bottom line is affected. So obviously you want more guests. However, nowadays the policies of OTAs are to blame.

If you’re a regular here, you may have seen our article on the high cancellation rates of OTAs

If you haven’t read it, we’ll summarise:

OTAs actively encourage guests to book multiple hotels and then cancel at leisure.

It’s unfortunately an indisputable fact that OTAs such as Booking have inflated cancellation rates to levels as high as 40% thanks to this policy. It doesn’t affect them as they still take a commission from whichever hotel booking actually went through.

But this hurts hotels.

So while overbooking strategies were a good idea a decade or two ago, they are absolutely essential now!


The Benefits of an Overbooking Strategy

hotel website examinationBearing in mind that these benefits are only available with a good overbooking strategy, here are the benefits.

  1. Recoup Your Losses
    • A cancellation is a loss at the end of the day. Your resource (rooms) was set aside and made unavailable for other potential guests while they searched. By overbooking you can negate this loss.
  2. Drives Bookings
    • Your actual bookings should be almost the total number of your rooms. If you overbook with more guests than you have rooms, when the cancellations begin, you’ll have most of your rooms filled anyway. 
  3. Compensation is Cheaper
    • If you have to provide compensation and alternative accommodation for guests because you’ve overbooked a little too much, that’s fine. The costs involving walking guests to their new accommodation is far less than having consistently empty rooms.
  4. Proven Strategy
    • Overbooking isn’t a new thing. It’s more important now than ever before thanks to the OTA policies, but it’s been around as long as hotels have existed. It’s a tried-and-tested strategy that drives revenue and has stood the test of time.
  5. Get to Know Your Data
    • By creating an effective overbooking strategy, you’ll dive in-depth into your data. In the process of designing strategy for your hotel you’ll gain better insights into your guest data and the appearance of your hotel. It also helps hotel marketers like us to learn exactly how to show you at your best!

The Dangers of Overbooking

With the right overbooking strategy, your hotel won’t suffer downsides. The dangers appear when a hotel overbooks without a strategy.

Taking your best guess simply doesn’t work. These are what those hotels can face:

  1. Bad Guest Experiences
    • There are certain types of guests that must not be overbooked (more about that later) but these guests will face a bad experience. Jokingly referred to in-house as “The Jesus Experience”, if there’s no room at the inn, large groups, families with young children or loyal, returning guests will view an overbooking as more than a minor inconvenience – it will be a black mark on your record and a dreary holiday for them!
  2. Negative Reviews
    • As digital hotel marketers, we’ll tell you – there’s no marketing like earned marketing. Potential guests trust the reviews of previous guests online because they are from unbiased sources. If you start a string of bad, one-star reviews then you are bound to deter future guests!
  3. Costs
    • We’ve already mentioned that when done correctly, overbooking will drive your cash flow. However, if done badly, the costs can mount up in the form of compensation and losing future guests!

hotel_reception

The good news is that all of these can be avoided with a little planning and preparation! With that said, let’s talk about the tips to build an effective overbooking strategy!


Tips to Build an Effective Overbooking Strategy

For the record, we will focus on achievable tips that hotels and hoteliers of any size can take advantage of. While it is true that machine learning can predict cancellations with 98% accuracy, it’s not always a viable option for smaller boutique hotels and independents.

Brush Up on Your Data

Guest_statisticsIn other news – water is wet! Although we may sound like Captain Obvious, you’d be surprised how many hotels fail to really dig into the nitty gritty and analyse their cancellation rates.

Of course when it comes to making rate plans for hotels and calculating your BAR, data is your best friend. But cancellation rates go unnoticed. 

Is one of your channels prone to greater numbers of cancellations? If so, calculate how much more often you receive cancellations from that channel! The time of year, the weather, the sporting events (and cancelled sporting events) can all contribute to calculating your overbooking strategy.

There’s no such thing as too much data. So fight the boredom and study!

Don’t Overbook Certain Guests

While formulating your overbooking strategy, there are some limitations to consider. One of these is your hotel guest types.

Do not overbook these types of guests:

  • VIPs
  • Loyalty program members
  • Frequently returning guests
  • Families
  • Guests with additional needs
  • Guests who requested late check-in times

Each one of these guest types has a different reason for their needs. Every single one will view an overbooking situation as an extraordinarily negative experience. Even if you upgrade them to an even better hotel as compensation, you simply mitigate some damage to your reputation, you don’t salvage it.

Cap Your Overbookings

While you use your data to calculate the optimum amount of rooms to overbook, beware that you should always prepare a cap on them.

Overbookings left to grow wild, or simply done as a “best guess” situation will not work. You may get lucky a couple of times, but eventually this laissez-faire attitude will catch up to your revenue management and cause damage.

Partner Up

hotel marketing checklistWe know that you want to outperform your compset, we want that too! But it’s okay to work with them when the need arises.

If you can generate a reciprocal relationship with another nearby hotel of around the same standard and quality as yours, you can both profit from an overbooking strategy safely. 

Obviously you should compare room rates, quality and the number of walked guests that you provide each other. With this, you can make sure that walked guests are provided with the same stay that they wanted to have with you and also calculate the costs involved in relocating them.

Take Care of Your Guests

Goodbye, good luck, have fun!” isn’t going to cut it. 

Despite walked guests going to another hotel, they were still your guests and your attitude should demonstrate that. Organised transportation, a comped meal and an apology bottle of wine will go a long way into soothing their irritated mood and mitigating those negative reviews online!

It Can Happen

Even with the best overbooking strategy, you can still experience anomalous numbers of guests. But it’s not the end of the world!

This is especially true for long-stay guests. If you provide alternative accommodation for a single night, and offer them the choice between the alternative for the rest of their stay, or to return to your hotel and stay in the VIP suite and extra services / upgrades, they’ll probably return to you.

Nothing says I’m sorry like a luxurious hotel room, spa treatment and a bottle of wine!


Build Your Effective Overbooking Strategy

hotel marketing auditWhile these tips apply to all hotels, calculating your strategy is going to take time. It’s going to need tweaking and changing over time as times change. But eventually, it’ll be one of the strongest parts of both your revenue management and your marketing strategy.

If you have any questions about how to implement your overbooking strategy just contact one of our hotel marketing specialists today. You can request a free hotel marketing audit of your hotel that we’ll release to you after a brief on-on-one chat with one of our specialists!

With a long history of experience with the hotel and hotel marketing industries, our knowledge isn’t just theoretical – we’ve been there, done it and improved upon it. So whether you’re struggling with your hotel website, or have an outdated hotel social media strategy, we can support your every need.

Remember to browse our free resources filled with hotel marketing guides and tips for hoteliers!

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      Let's talk Hotel Marketing

      FREE of charge in just 30 minutes

      Just fill in the form and we'll arrange a brief meeting to discuss your current marketing efforts.

      Feel free to ask us anything that you're having trouble with and we'll do our best to provide exact recommendations on how to improve.