Case Study

Read the excerpt below and answer the TWO (2) questions at the end of it.

The practice of overbookingaccepting reservations for more rooms than are available by forecasting the number of no-show reservations, stayovers, understays, and walk-ins, with the goal of attaining 100 percent occupancy is viewed by the general public with skepticism. As a future hotelier, you should prepare for the onerous task of developing a policy on overbooking. The front office manager is responsible for administering this policy.

American courts seem to agree that in many instances, overbooking to overcome the problem of no-shows and late cancellations may produce advantages by way of operating efficiencies that far outweigh the occasional inconveniences to guests and travellers. They have held hotel overbooking to be customary and justifiable practice for offsetting the losses from no-shows. The financial loss due to no-shows may be substantial. In a hotel that typically has 100confirmed reservations (not guaranteed with a credit card) and experiences a 5 percentno-show rate, five rooms per night would remain unsold. With an average room rate of $70, these five rooms would cost the hotel $350 in revenue. Over a year, this amounts to$127,750. Lost revenues of this volume force the hotelier to develop an aggressive occupancy management policy. This policy is based on management of the occupancy categories into which guests are placed: those with confirmed reservations, those with guaranteed reservations, stayovers, understays, and walk-ins. However, most hoteliers require a guest guarantee his or her stay with a credit card number to ensure their intent of arrival and thus guarantee payment for product and services on the part of the guest and hotel.

Extracted from -

Bardi, J. A. (2006). Hotel Front Office Management, 4th Edition. New Jersey, Pennsylvania: John Wiley & Sons.

Question 1

a. Demonstrate your understanding on the subject of over booking in the lodging industry.

b. Justify why the practice of over booking is common in most lodging properties.

Question 2

The lodging industry commonly offers a variety of rates to cater for different segments of the market. Distinguish ANY FOUR (4) categories of room rates that are commonly offered by the hospitality industry with suitable examples.