16 Sep Why overbooking should be cancelled!
Overbooking is a fact of life in hotels, and whether you love or hate it there is a very important question that in 18 years of hospitality, I have never had asked of me nor ever asked of anyone else I work with… What is the impact of overbooking on you?
Now, I have spent far too many years being the person who has to tell that guest that the room they booked and guaranteed, actually no longer exists and they have to move elsewhere; in fact I became a master of the art of out booking guests whilst working in Blackpool and very rarely had an issue with moving a guest elsewhere. But that was in a town where most people only cared for a bed, forget about where it was, as long as they could sleep they didn’t care; that town was laid back, guests were easy to deal with and finding a bed in the many thousands of rooms available was actually easy.
Not everywhere is so simple, and wow, don’t receptionists across the world know it!
There is a huge difference that exists between revenue and operations. A small decision taken by revenue can make a huge difference to operations, and overbooking is a shining example of this! My judgement on overbooking remains entirely reserved, but I will say this: I understand why overbooking exists, and why a hotel does it, but I am still yet to be convinced that it actually provides any real benefit to a hotel or the staff.
Let’s have a look at some of the effects, and guidelines, of overbooking:
1 – Staff stress. And by no means do those two words sum up what it is really like! You end up facing an angry guest, whilst ringing every hotel in the area, who are also all full, then finally you find one bed about 10 miles away at a rate 3 times higher than normal! All this whilst being screamed at, dealing with a switchboard that is bleeping with waiting calls and trying to finish your reservation checks. How exciting! (that is sarcasm!) Under any overbooking situation I have always noticed one consistent, unaltering thing. Revenue never seem to be seen anywhere; the have taken the decision, then left everyone else to deal with the fallout! You may be lucky and have a revenue manager that sorts out the overbooking for you, and if you do, hold on to them as they are rarer than rocking horse poo and fairies! It may seem amusing, but is sadly true. The decision taken based on available statistics and spreadsheets, actually has a massively demotivating and often debilitating effect on staff. Front Desk staff have enough to deal with in a given day, let alone being screamed and shouted at because of a decision taken by someone sat in a snug little office away from guests and anyone their decision effects. I call all Revenue Managers to war… You sit on the front desk and deal with the out booking of guests and the issues that come along with it… Then, once you understand why Front Desk staff don’t like overbooking, have a true look a whether or not you agree with it! As a FOH Manager by trade, I have lost count of the times I have had to send someone paying £25 to a hotel that is charging us 5 or 6 times that amount… And so to my next point…
2 – The money it costs. Okay, overbooking is designed to be for when you have 100 rooms, 110 bookings, and then hopefully 10 rooms will not turn up to check in. But when they do turn up, your staff have no choice but to find a room for them, which can be very expensive. Take for example a case I have seen where a guest paid £20 for a room, the had to be out booked, at a last minute cost of £120. This is fairly obviously a huge loss… It the equivalent of losing an additional 5 bookings at £20. This effectively means wiping out 5% of your rooms revenue in a 100 bedroom hotel! Now examples like this may not always be this extreme, but they can be worse than this too… Consider the case above, now imagine they had no car. So the hotel pays for a taxi, another £5-10. Then the guest complains post-stay, and gets a refund of £20, plus a free nights stay with breakfast. A £20 out booking has actually turned in to a cost to the hotel of over £150. Every person you book out does not just cost money, the loyalty and customer experience is lost too. Remember that the person being out booked could be the conference organiser (I have dealt with this), or they may be a mystery shopper (this has happened to me too), or they may be a previous complainer (yup, I have known this to happen too), or they may be a guest who is potential big business (you guessed it, been there, seen it!). This then becomes more than just an immediate loss, it becomes a long term loss that is very damaging, not just to the hotel, but also to any chain it affiliates with. The main point here is that you can unleash all forms of financial turmoil and loss by the simple out booking of one guest; you will also lose your valuable staff if the out booking keeps occurring, as they will one day just up and leave! You may think not, but I have talked many people out of abandoning a shift because they have to deal with a hotel that is massively overbooked! This should teach you a lesson for the future… And so to my next point!
3 – Last years statistics actually tell you nothing about this year! Okay, okay, pick yourselves up from the floor after collapsing at the shock that I dare say such a thing…. after all historical stats are everything…. Aren’t they? Well, no, they are actually pretty irrelevant and tell you not much more than you can find out by looking out of the window. Last year you may have had 4 no shows on average through August, but this year is so massively different that your little spreadsheet (okay, fairly comprehensive spreadsheet then), it cannot tell you what will happen this year at all. FACT! Don’t believe me do you? Well…. Did you have exactly the same guests staying on exactly the same dates, on exactly the same rates, in exactly the same rooms? I would never believe anyone who said yes! Even if they did, then….. Were exactly the same events on in exactly the same arenas, with exactly the same performers? Or were there exactly the same people getting married as last year and paying exactly the same amount with exactly the same number of guests? Okay, I think I have made part of my point with that. To tell a Front of House Manager that the overbooking is set at 10% because that is what is was like last year, is like building a hotel out of sponge cake, I.e. pointless! There may be a huge conference on just around the corner, or a huge international pop star could be performing a one night only concert at the arena up the road! These are things a spreadsheet about last year cannot account for. You need to review your strategy based on the future, not the past as this is the trap of so many revenue specialists. Your past statistics are just that, past a.k.a historic and not going to tell you how tomorrow will work! And here comes another point….
4 – If you are fully booked, what about your competitors? Now it is fantastic to be full and for your competitors to be still selling rooms….or is it? See my previous post about some more on this, but basically if you sell all your 100 rooms at £20 each, and your competitor sells 50 at £50 each, your competitor has just made more rooms revenue than you! They made £2500 whilst you made £2000 and they had lower costs too as they had less rooms to service etc etc etc….. So who was actually financially better off? Think logically here and open up to what your competitors are offering and doing and what they are selling, even if they are still selling! If everywhere nearby is full stop selling!; if nowhere has rooms, chances are they too are overbooked too…so everywhere is scrambling to find a room at 1am when the last guests arrive but have no room for them…. Such brilliant service this is for a guest who is paying you to provide them with a service, so much for that when you are kicked out of your pre-booked hotel at 1am with little more than an apology! You not being overbooked is actually a financial goldmine when everyone else is overbooked… You can charge double or triple and achieve that rate as there will be no-one else they can turn to! It is the age old revenue model of supply and demand; as supply decreases and demand increases, prices increase to maximise profit. But remember, that as prices increase, demand decreases and supply generally increases with many surpluses so do not price yourself out of the market! What I mean to say here is that you should NEVER overbook your hotel if everywhere else locally has availability that is guaranteed to be there a 1am if it is needed! I have endured many an uncomfortable wait for a taxi with a guest being out booked.
So much has changed in the industry, and competition has really hotted up across the whole hospitality spectrum, to allow yourself in to a position where you are sending guests to a competitor quite willingly, and often paying your competitor for the privilege, on top of losing money on the booking and having a complaint to deal with… No other business in the world does this, except hotels. It is all about bums on beds and the ‘people’ aspect has been lost somewhere in the depths of a spreadsheet! Occupancy means nothing if you have sacrificed the core values of your brand or staff to achieve it. The true fact is that overbooking and subsequent out booking loses customers, costs money and decreases morale on the from desk. Gambling does not often pay off and overbooking is a gamble with very bad odds! You do not have instant justification for overbooking because sometime people do not turn up… If they do not arrive you have vacant rooms that could be used for early arrivals… The time saved by not cleaning one rooms could allow a housekeeper to deep clean a room or scrub those tiles, or even go home and reduce staffing costs.
When overbooking works, and the adequate number of people do not arrive, then fantastic. But when it doesn’t, because all external factors have not been taken in to account or similar, the it hits your business and you staff hard! You lose hours of productivity through people having to sort out the mess caused by someone else simply choosing a number and detailing it in a spreadsheet under the heading ‘overbooking limit’. When did the life of travellers and valued customers, who are living, breathing, thinking, social and aware, become deconstructed in to figures on a spreadsheet that guide everything a business does. Hospitality is a demanding, reflexive, and change-by-the-second industry, and a spreadsheet does nothing to change, control or manage that. Your staff are your forecast specialists, so use them and find out what is going on so you can actually plan, rather than rely on what happened last year to tell you what will happen tomorrow!?
To confirm my beliefs… Overbooking = greed and greed = cost cutting and loss of guest experience…. And I am all about retaining the guest experience!