“Overbooking” or being “walked” are terms few people were familiar with unless they had spent time working in the hospitality or airline industries. That was until a video of a bloodied doctor being removed from an overfilled United Airlines flight spread like wildfire.
What is overbooking? Why do hotels and airlines overbook? How do you deal with it? These are but a few questions that came to people’s minds recently when United made the headlines by forcefully dragging a passenger off a fully booked plane against his will.
Overbooking as a practice has been around for many years and it’s used by revenue managers across many different industries. In the hotel industry, hotels will often sell more rooms than they physically have or if, due to maintenance issues, certain rooms become unavailable for use.
Why was overbooking a relatively unknown term prior to the United incident? Because, when done correctly, a guest wouldn’t even think twice about it and there would be no bad publicity.
An empty hotel room is a perishable product. You only get one chance to sell that room for any given day, so if you are forecasting to be 100% full, the last thing you want is to end up with an empty room due to last-minute cancellations or no-shows. Many revenue managers and even general managers have targets to hit, and that includes filling the hotel when there is an opportunity to do so. That’s why overbooking is practiced and will continue to be practiced.
Overbooking should be based on algorithmic decision making. It’s never a good idea to just base it on “gut” feeling. You need to look at historical booking patterns and demand and those metrics to determine by how much you should overbook. A good revenue management system like Duetto is able to provide that. Once you have determined the number of rooms to overbook by, this needs to be clearly communicated to the operational staff so that they can then start making preparations.
Additionally, it’s important to plan in advance – the more time you have to arrange everything the better, and that would definitely help avoid situations like what we saw with United Airlines and the poor doctor.