31 Mar Overbooking is more hassle than it’s worth!
Firstly for my regular readers – sorry for the lack of posts recently; lots of stuff going on in my life and lots of working hard! But here I am again with another ramble on about hotel practices!
I regularly review what drew people to my site, including search terms and links from other sites; one interesting point is that not a single day has gone by without at least 2 or 3 people arriving due to searching for information on handling overbooking and the out booking of guests.
When I started in the industry some 20 years ago, I was only a porter and carried bags for the odd reward of 20p, or if I was really lucky a whole shiny 50p piece – not only this, but overbooking was a practice that was rare, if not unheard of by most – revenue management is a relatively young science, only really coming in to the fore since the mid 1980’s in the USA and since then it has become a behemoth that not only works well to increase profitability, but also has become the often controlling factor of hotels. In many hotels, the Revenue Manager is often the most influential – if they say raise rates, then rates will be raised; if they say overbook, the hotel will overbook…. and herein lays a problem.
Let me just say, before I continue, that I know that revenue managers do a good job in keeping hotels profitable, and that can never be ignored!
My main issue with most revenue managers is this – they are not on the front line! I am someone who firmly believes that to know and understand your hotel and guests, you have to be involved with them and get involved with the day-to-day operation of the site. A spreadsheet and statistics can only tell you so much and I am yet to find anyone who can look at a revenues spreadsheet and accurately predict what the future holds – in my many years of management, I have only ever known a revenue forecast to be accurate once…
This is because even the most sophisticated of computer systems does not know how your guests, or potential guests, will behave – the guest who books a room and then cancels 20 minutes later because plans change cannot be accounted for, neither can the guest who has a last minute emergency and cannot use their booked room, or even the guest who has an unexpected addition to their work and walks in to the hotel begging for a room for the night – human behaviour is simply too unpredictable to be analysed using a revenue management system.
But this post is about overbooking and not a rant at revenue managers – the background above is just to support some of my ranting!
Overbooking is viewed by many (if not the majority of) reception staff as an abhorrent practice and here is why:
Guests are alienated
I don’t mean that guests are made in to creatures from another planet! I actually mean that you really p*ss the guest off in the majority of cases – imagine you were travelling for hours only to reach your destination and be told you are actually being sent elsewhere instead because the room you booked and paid for had in fact been sold to someone else! Very few other industries would do this – airlines do, but train companies will not sell the same seat twice, and the local supermarket will not sell you a television without you actually knowing that television is actually available. And this is what guests think about! Revenue managers, forecast models and intricate mathematical algorithms will not stop that guest screaming at a receptionist, nor will it stop that receptionist feeling like a horrid person for having to tell someone that the room they booked is occupied by someone else!
The administration of outbooking is a nightmare
This is no understatement! Many people think that a receptionist will simply ring and get a room at another hotel; but what if all the local hotels are full? I have had to send people over 50 miles to alternate hotels in the past, and that is just unacceptable to me! But the point here is that the cost in people-hours is often higher than you would think. Ringing every local hotel to query availability and rates is time consuming; not to mention then having to arrange invoicing, room holds, contracting blocks of rooms if necessary, obtaining purchase order authorisations, negotiating room releases, contacting guest and third party agents and all without even considering the length of time you have to deal with the guest at the desk, then potentially their complaint afterwards!
The cost of outbooking
Outbooking is not just a simple case of getting someone else a room – often you are get the nearest available room, at the last possible moment and this usually means that the rate is far from cheap! I have previously had to pay for guests to be accommodated in bedrooms that cost 5 times the amount they were paying, with us picking up the cost – a £50 booking ended up costing us £250 for the room, then £25 for taxi’s and £30 for a bottle of wine – we ended up losing over £250 on that booking, effectively wiping out the revenue from 4 or 5 other room bookings – if overbooking were not in place, the hotel may have potentially turned down a £50 booking, but thats better than losing £250 – similarly if the hotel had a non arrival, you would still have the right to charge the failed arrival for the full room cost anyway.
Not only do you have to consider the impact on guests, but the impact on staff. Dealing with out booking and overbooking is stressful, and I mean stressful! The anticipation of being the one facing the guest, alongside the amount of work involved, can be very detrimental to your staff satisfaction. I have never yet met a receptionist who actively wants to out book people or who is excited about having the chance to send a guest to another hotel.
Turning a guest away (which is effectively what overbooking does), does very little to enhance your reputation. In fact it can do quite the opposite. TripAdvisor is littered with poor reviews of hotels that people have not even stayed at, but they get a bad review because they out booked the guest (in some cases halfway through their stay). Don’t forget that other marketing channels will also be affected – complaint posts on social media channels, as well as bad word-of-mouth and complaints to travel agents, corporate bookers and other agencies.
Loss of business
Many people will be shocked to hear that certain revenue management strategies carry a high risk of business loss – such a strategy is overbooking. This is because you never quite know who that guest is walking through the door. Could you imagine out booking a mystery shopper or a high-level VIP guest… it has happened in my career! similarly, that guest could be the corporate booker for a huge company or could be someone who is staying with you to see if the hotel is suited for a large party or event or even for long term guests. Whilst the chances of this occurring are not very high, they still exist.
I am not saying overbooking is wrong (for hotels that have high levels of non-arrivals) but getting it right is such a task of fine-tuning that can take years to perfect – I fully agree that overbooking allows increased revenues, but the main point here is that overbooking holds many hidden costs – remember that those 5 hours spent arranging overbooking could have been utilised to improve guest experiences, streamline reservations or even be saved as a cost!