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Overbooking: Hotels Talk The Talk To Avoid The Walk

Hoteliers say guest overbooking is a reality that can be kept under control with efficient procedures.

Friday, July 28, 2000
Alan Salomon
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Overbooking: Hotels Talk The Talk To Avoid The Walk

SPECIAL REPORT -- Leisure travel is up but overall occupancy is down in most markets this summer, making last-minute bookings enticing to hoteliers. In that scenario, overbooking and walking guests looms as an issue, but the hospitality industry seems to have the problem under control, according to executives at several major chains.

Factors such as sophisticated front desk systems that help a hotel override the problem, guaranteed reservations and common sense planning are the main reasons major chains say this is not a typically an epidemic.

When overbooking happens, hotels usually are ready with upgrades upon the next visit, extra points in frequency programs, fruit baskets and free nights at another property. Still, walking is an inconvenience to both hotels and the guest.

Most hotels don't have a set policy on overbooking, though, and approach it on a case-by-case basis.

The cause of overbooking can usually be traced to lower overall occupancy rates, which causes hoteliers to work harder to fill every available room even on nights they know they are technically sold out.

"At least we don't overbook to the extent the airlines do," said one hotelier. But hotels are not faced with a federal law like the airlines, which says they must compensate for walking a guest. Most, however, usually offer something more than a “we're sorry.”

"We know what we will do, but it's not etched in stone," said an executive of a large chain.

The same is true for Bass Hotels & Resorts, according to an executive.

"Overbooking is not a serious problem at our hotels although we recognize that it does occur," said Jeanne Frensky, Vice President of Revenue Management and Systems Planning for Bass Hotels & Resorts. "The prime directive for our hotels is a written policy in our standards manual stating that if the guest has a guaranteed reservation then the hotel must pay for the first night's stay at another Bass Hotels & Resorts property or at another comparable facility nearby (providing transportation as well). Guest retention and brand loyalty are our goals and we've got to provide special services in these situations to reach them."

Christina Lanier, Sales Executive for Lodgistix, a popular front desk system within the hospitality industry, said some hotels will say they absolutely will not overbook.

"This is especially true in the upscale category, where it is rare that someone is walked," she said. "Most of those hotels keep 10% as a fudge factor." Lanier said they make that decision based on their history of always having a 10% no-show factor.

Lanier said the entire problem is a case of Russian roulette.

"If a sales department overbooks due to a conference and their group blocks aren't working properly, the hotel can be in big trouble. This occurs if the system doesn't show the rooms that dropped off after the cutoff date for the convention," she said.

Some overbooking is the fault of the guest, but the hotels take the blame.

"Our biggest challenge comes from people who don't cancel reservations," said Jeanne Datz, Director of Communications for Hilton Hotels Corp. Hilton doesn't have a firm policy on overbooking.

"Walking a guest is not something we like doing, but we can't control it," said Datz. "It mostly happens when something comes up and a guest can't make it in and doesn't call ahead."

Ironically, airline overbookings sometimes cause hotel overbookings. Datz said an airline might bump passengers to stay in an airport hotel, thus bumping late-arriving guests at that particular property. Hilton strives to keep the guest in the Hilton family if they are walked.

Starwood Hotels and Resorts said that the “keep it in the family” approach is also its primary option, but Glenn Tuckman, Vice President of North American Operations for Starwood, said the first concern is a guest being relocated quickly and conveniently and then trying to win him or her back.

"If they have another preference it is always accommodated," said Tuckman, who added that Starwood's minimum policy on overbooking is paying for that night's stay, transportation and a phone call.

"We will go beyond that," he said. "Everyone will exceed their minimum requirements if the guest complains enough."

Tuckman said the technology that has emerged in the last 10 years makes hotels able to better forecast their demands, thus bringing overbooking down to a minimum.

"In the next two years we will be investing $40 million on software that continues to eliminate or increase the accuracy of forecasts," said Tuckman. "No one intentionally overbooks. You forecast to be sold out."

Tuckman said his chain has noted that the majority of problems arise when a guest overstays. He said if an expected departure doesn't occur, there usually isn't room for new arrivals.

Gordon Lambourne, Vice President of Brand Public Relations for Marriott International, said overbooking isn't a big issue with Marriott.

"And, I don't think it will be a problem in the future, because of the systems that are in place now and those that are coming in," he said. "Systems override the problem."

Marriott's policy is to keep the guest in the chain's family of hotels first. If that is not available, the same respective segment is the next choice.

"In D.C., we have choices," said Lambourne. "If those choices aren't immediately available, we start looking in a comparable service area."

Lambourne said if a guest has a confirmation number and is guaranteed a room via a credit card, "we take care of them."

"A Marriott Rewards member, especially one in the Elite status, will get more amenities than us simply paying for a room," he said. "We might even send them a check to compensate them for the inconvenience."

Hyatt Hotels' Chris Elam, General Manager of the chain's reservations center in Omaha, NE, said overbooking is a fact of life in the industry.

"You can't manage this by policy," he said. "You have to try and make sure you are leveraging your assets, so you have to accommodate."

Elam said Hyatt has a line on what is causing the problem and what the situations are. He said it’s mostly due to guests not showing up.

"When that happens you have a vacant room without a chance of a recovery," he said. "If a hotel has one room left and two people show up, one will be walked."

Again, the first choice is another Hyatt. Hyatt will not only pay for a night, but offer a free return to any other Hyatt at a later date.

"Our objective is to oversell by no more than five rooms," said Elam. "If in the middle of the day you are 40 rooms oversold, you know you will be walking people." He said overbooking could start as far as two months out.

Elam said the industry is handling the problem as best it can with what it has. He said it should become less and less of a problem in the future.

"Revenue management and technologies for forecasting are getting much better," he said. "More hotel companies like us are going to much stricter single-image inventory systems."

No one company in the industry believes hotel chains should be forced to operate under a single federal guideline, as the airlines do. Airlines are federally mandated that their passengers are compensated if bumped from confirmed flights.

"The reason you need regulations is when people are not being accommodated," said Tuckman. "The industry has been responsive when this arises. However, that isn't to say we don't have blemishes."

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