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Thoughts On Overbooking

by admin on August 30, 2016

Do you offer unit reservations to prospective customers? And does your management software let you monitor the current reservations versus availability of each type of unit? If you have this information at your fingertips during a sales call, you have the power to decide whether to overbook a particular type of unit.

Why would you want to overbook units? It’s a practice very common in the hotel and airline industry. They routinely oversell their inventory, knowing there will be a percentage of no-shows. Without the overbooked reservations, these no-shows would result in empty seat or rooms.

You know better than anyone what your no-show percentages are. For example, say that typically 25% of the people who reserve units with you never actually rent the unit. You could overbook that type of unit by 20% to increase your odds of a near 100% sell out. If you have 5 empty “Climate 10×10” units available with 5 reservations pending, you could go ahead and take one more reservation and overbook that unit. Previous experience tells you that at least one of those reservations will be a no-show.

What do you do if the 6th guy shows up? The risk side of this risk/reward practice is that you’ll have to give him a larger unit for the price of the original reservation. Not a huge risk, and if you optimize your overbooking percentages, this situation will rarely occur. Just make sure when overbooking that you do have some larger inventory available. The last thing you want to do is “walk a guest”, which is send someone with a reservation away because you have nothing at all to give them.

Don’t oversell your units until you have a good grasp of your no-show percentages. The perfect overbooking level balances the risk of discounts and chance of loss of goodwill against the extra revenue gained from a higher occupancy level. If you can get this right, you have another tool to maximize your margins.

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