Defining a sustainable overbooking approach in the hospitality industry

Abstract

Tourism industry is characterised by a growing uncertainty about volume of demand and relationships with tourists. Hotels often practice overbooking to face uncertainty, seeking to maximise rooms' occupancy rates acting on the reduction of uncertainty on demand. At the same time overbooking is often correlated to an increase of uncertainty in relationships because it is very difficult to predict how different customers might react facing overbooking. This article aims to compare two different overbooking approaches: the traditional overbooking approach and an alternative one, called fair and transparent overbooking, according to which customers are made aware in advance of the possibility of overbooking. The main objective is to understand what are the consequences of traditional overbooking, both positive and negative, and then to figure out if the introduction of a new overbooking formula could alleviate the negative consequences, while maintaining the benefits, making it more sustainable from a social, relational and economic point of view. The theoretical analysis is supported by an empirical survey which aims to verify how overbooking is common, for which reasons is mainly practised by hotels and what are the main benefits and problems. Finally, the survey aimed to explore the possibility of practicing the fair and transparent overbooking.

The perceptions of frontline employees towards hotel overbooking practices: exploring ethical challenges

“…From the viewpoint of increasing perceptions of fairness, the literature also frequently agrees that customer familiarity with a range of pricing and revenue management practices, along with clear information being provided by the hotel, can increase the likelihood of the practice being considered to be ethical by the guest (Choi and Mattila, 2004;Suklabaidya and Singh, 2017). In addition to these general considerations, some of the revenue management literature has specifically examined the ethical issues surrounding overbooking practices and their impact on the guest (Wangenheim and Bayón, 2007;Hwang and Wen, 2009;Fasone and Faldetta, 2013). Here the common theme appears to be that unless adequate compensation strategies are put in place the consumer may perceive overbooking strategies to be unfair and that this may lead to a reduction in customer loyalty (Hwang and Wen, 2009), negative word-of-mouth (Wirtz et al, 2003;Wangenheim and Bayón, 2007), loss of goodwill (DeKay, Yates and Toh, 2004), negative impacts on long-term profitability (Mauri, 2007), and decreases in long-term customer relationship value over short-term revenue gain (Wang, 2012;Fasone and Faldetta, 2013).…”