What is a common strategy for managing hotel inventory?

Overbooking rooms is a widely recognized strategy in the hotel industry aimed at maximizing revenue. Hotels often experience a certain percentage of no-shows, where guests who have made reservations do not arrive. By overbooking, hotels anticipate this rate and sell more rooms than are physically available, operating on the assumption that a certain number of guests will cancel or not show up. This practice helps to increase occupancy rates and revenue, especially crucial in a business where fixed costs remain constant irrespective of the number of guests.

In contrast, other strategies present limitations or may not contribute as effectively to inventory management. Reducing staff during peak times can lead to decreased customer satisfaction and negative experiences for guests, potentially harming the hotel's reputation and future bookings. Standardizing prices across all room types could lead to missed opportunities for revenue maximization, as hotels often adjust prices based on demand, seasonality, and customer segmentation. Prioritizing guest accommodations over occupancy rates may not be sustainable for the hotel's financial health, as it might result in an underutilization of available room inventory, ultimately impacting profitability.

Therefore, overbooking continues to be a prevalent and strategic approach to maximize occupancy and revenue in hotel management.