What is the meaning / definition of Underbooked in the hospitality industry?
Underbooking is a situation that happens when a hotel has failed to sell the number of rooms that reaches their satisfactory booking standards.
Some hoteliers try to reduce double-bookings by allocating separate inventory for each distribution channel. While this does eliminate the potential to sell the same room twice, it can also easily result in unnecessarily vacant units. One channel could sell all of their allocated inventory and start turning customers away while other inventory is sitting unsold on another platform. It’s not a recommended practice and luckily one that can be avoided with a pooled inventory model (all units available to be sold by all channels at the same time) and PMS-to-distribution channel interfaces (to reduce risk).
Reservation management can be tough. The task of balancing the need to fill rooms and the desire to provide a flawless customer experience is a delicate one. Make your life simpler by ensuring you have a property management system that takes credit card information at booking and interfaces with all your distribution channels.
Overbooking inventory is a strategy used by many hotels to account for no-show guests and cancellations. When it works, it saves a lot of revenue, but there’s significant risk associated with the practice— particularly for smaller, independent properties which have fewer rooms to play around with. When it backfires (i.e. when you find yourself in front of a confirmed guest with no room to offer) it can be extremely stressful and cause a lot of damage to your brand. Unhappy customers have a tendency to express their dissatisfaction online after all.