The Advantage and Disadvantage of Overbooking Essay

Overbooking is when a manager books more reservations than they have space for. This is a strategy that if done correctly will perfectly fill all vacant space in a restaurant or hotel due to cancellations. Managers know that if they do not occupy all their rooms for the night, they will lose revenue that cannot be recaptured the next day. They also expect some reservations to cancel, leaving them with vacant space. By overbooking, cancellations can be easily recovered. However, it is a risky strategy because if not enough people cancel, there will not be enough space for everyone who has already booked a reservation. If managers are not prepared to handle these situations, they can lose future business from these guests and risk damaging their revenue and reputation.Overbooking has its advantages, and of done correctly can be a great technique that maximizes profit. One advantage is that overbooking yields a large impact on hotels revenue. Hotel rooms and restaurant tables are perishable products, meaning that if they are not sold for that night, the establishment will lose money and cannot make up for it by selling it later. Managers often use this technique so they know for sure that they will fill their space for the night, even if they have more reservations show up than expected. Overbooking also allows managers to counter cancellations. It is always expected that a certain number of people will end up cancelling, so by booking more than you have space for, you are able to fill in all vacant spots. Another advantage is that compensation is often cheaper than leaving a room or table empty. Through overbooking it is always possible that more reservations show up than expected and there is no more room for them in the establishment. Managers will often give compensation to these guests, such as free meals, free spa visits,...

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