Overbooking- What’s the golden number?
If you were hoping for a nice round number that would forever settle your overbooking woes, I regret to inform you that unfortunately there is no one-size-fits all strategy when it comes to overbooking, but this blog will help you look for a few key factors that will ultimately guide you to a solid overbooking strategy. In no particular order, try the tips below to implement a more effective overbooking strategy at your hotel:
- Calculate your hotel’s sell-out efficiency
Export a history report from your PMS, or RMS system and count how many nights you had that were potential sellouts. (If you aren’t sure what constitutes a potential sellout, just include nights that were 95% or more, and be sure to include nights where you did hit 100%). If you find that your hotel is missing sell-outs more than 50% of the time where you were within striking range of a sell-out, consider implementing a small, but reasonable overbooking strategy to make the probability of a sell-out more likely.
- Establish a comfort zone with Operations and start small
Although most front desk agents and GM’s like to avoid overbookings like the plague, it’s important to at least have the conversation between the Revenue Management and Operations departments, so operations doesn’t have an unpleasant surprise when you implement the strategy. It doesn’t take a huge overbooking # to drastically increase your sell-out efficiency. Even starting with an overbooking of 1, or 1% of your room-count can be a great way to get your team used to handling an overbooking, even if they seem painful at first.
- Consider your hotel’s size
Every hotel is different. An oversell of 2 at a 50-room property is an overbooking strategy of 4% of total inventory, which a significant number. Conversely, an oversell strategy of 2 rooms at a 600 room Airport property is an overbooking strategy of .3% of total inventory, which likely isn’t large enough to have any meaningful impact on sell-out efficiency.
- Understand your hotel’s cancellation rate, by market segment rate plan, and lead time
Calculate your hotel’s cancellation rate. Be prepared to answer questions such as: How often do arrivals cancel day-of, which market segment, or rate plans have the highest cancellation rate?
If you know that Senior citizen discounts cancel at a rate of 5% day-of-arrival, and you have 20 reservations with this rate plan arriving tonight, an overbooking of at least 1 is a mathematically sound overbooking number to have, especially if there are any other arrivals for the hotel tonight.
- Review and reward!
Review the results! Is your newly implemented overbooking strategy having any effect? If so, is it improving sell-out efficiency? Also, incentivize your team to make the perfect sell-out happen! I’m not saying cash bribes are legal, but… man are they effective, who doesn’t love a bribe, er gift card…or pizza party?!!?
To learn more about utilizing overbooking to help you win more perfect sell-outs, reach out for a demo of our software and revenue management services!
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