Forecasting Availability and Overbooking Chapter Four PowerPoints developed by Bharath M. Josiam, Ph. D. Professor, Hospitality Management University of North Texas, Denton, TX, USA And Edited by Gary K. Vallen, Ed. D. Professor, School of Hotel and Restaurant Management Northern Arizona University, Flagstaff, AZ, USA 1

Objectives of Chapter 4 Utilize and define basic terms and jargon An ability to perform a room count Unadjusted and adjusted room count Differences in “rooms available” calculations Forecasting rooms available for sale Impact of overstays ,early arrivals, no-shows, and cancellations on rooms available for sale A working knowledge of overbooking issues Legal ramifications of overbooking Anti-service issues at stake Possible solutions 2

Forecasting Available Rooms Automated Inventory Tracking Systems (Exhibit 4-1) Computer updates reservations in real time Shows projections a week at a time Shows today's arrivals by name, room type, group affiliation, other codes Shows reservations by quality Shows room availability by room type and status 3

Forecasting Available Rooms Room counts done for each day in advance Less accurate as we look further ahead Exhibit 4-6 & 4-7 Done many times a day for today 6 AM, 11AM, before and after 4/6 PM Terms to know: Committed Rooms (Yesterdays stayovers + today's reserved arrivals) Out of Order (OOO) Rooms = Rooms temporarily unavailable due to fixable problems Can be fixed quickly if absolutely essential Can be sold at a discount un-fixed, with disclosure Out of Inventory (OOI) Rooms = Rooms unavailable long-term due to non-fixable problems Cannot be sold today due to unacceptable condition Exhibit 4-5 for inventory calculation issues 4

Forecasting Available Rooms Terms to know: Understay – Guest who leave earlier than expected Overstay - Guest who stays longer than booked Stayover - Continuing guest, as per booking Overbooking - More rooms sold than available Expected Arrivals - Guests booked to arrive today Expected Departures - Guests booked to depart today No show - Guest with confirmed/guaranteed booking who does not arrive, but has not cancelled Early Arrivals - Guest who arrive day/s before booking Walk-ins - Guests without reservations needing rooms Room Count - Status of rooms sold and available House Count - Number of guests in hotel Walking the guest - Sending a guest with a confirmed or guaranteed booking to another hotel as we are full 5

Forecasting Available Rooms Components of the Simple Room Count (Exhibit 4-2) Only accounts for basic issues Rooms available (A) = 1000 Occupied last night (B) = 950 Expected Check-outs (C) = 300 Stayovers (D = (B-C)) = 650 Today's reservations (E) = 325 Rooms committed today (F = (D+E)) = 975 Rooms available for sale (A - F) = 25 Occupancy percentage (F/A) = 97.5% 6

Forecasting Available Rooms Adjusted Room Count (Exhibit 4-3) More sophisticated, accounting for many issues Computing Rooms Available Rooms available (A) = 1000 Occupied last night (B) = 950 Expected Check-outs (C) = 300 Add Understays (6%) = + 18 Subtract Overstays (2%) = - 6 Adjusted Departures (C1) = 312 Adjusted Stayovers (D1 = (B - C1)) = 638 Today's reservations (E) = 325 Less Cancellations (2%) = - 7 Less no-shows (5%) = - 16 Add early arrivals (1%) = + 3 Today's Adjusted Reservations (E1) = 305 Rooms committed today (F = (D1 + E1)) = 943 Adjusted rooms available for sale (A - F) = 57 Anticipated occupancy percentage (F/A)= 94.3% 7

Overbooking Overbooking - More bookings than rooms! Done deliberately for number of reasons Some guests will be no-shows Last minute change of plans Some guests deliberately make multiple bookings Some guests will be early departures Some guests will be last minute cancellations Too late to fill these last-minute empty rooms So hotels overbook to protect itself from revenue loss Done with historical statistics as guide Can go wrong for many reasons Problems if done too aggressively 8

Overbooking Reservations as legal contracts Courts say that reservations are legal contracts However, not worthwhile for individuals to sue Meeting planners have sued and won! Looming Legislation Many states have passed laws to limit overbooking Hotels say others at fault too! Guests may overstay without notice (Most common excuse!) Some states allow guests to be physically ejected! Tour operators book multiple hotels in a city, but clients may predominantly prefer one hotel Conventions are notorious for overbooking 9

Overbooking Common Overbooking Policies Hotel overbooking solutions (Exhibit 4-9) Check nearby hotels for room availability “Walk” overbooked guest to another property Chains do it within chain Watch for unethical FO Clerks who do it for money! Pay for taxi, phone call, comparable room Air-taxi in the Bahamas! Apologize with gift etc Overbooking and antiservice syndrome Industry should police itself, or congress will pass laws! Airlines are regulated by law - ask for volunteers and give them money and free tickets Problem is due to few hotels with poor service Do not train employees to handle overbooking Pretend the guest never made a reservation! 10

Overbooking Minimizing the Overbooking Problem Accurate and updated room counts Well trained employees Hotel not being too greedy! No-Show/Change Policies like airlines Harsh cancellation penalties Early departure fees Third Party Guarantees Trip Insurance, Credit-Card Guarantees, Travel Agents Guarantees, Corporate Advance-Deposit Reservations Quite a hassle in general, but may improve with technology Ultimately, balance risk of antagonizing guest with protecting revenue! 11

Objectives of Chapter 4 Utilize and define basic terms and jargon An ability to perform a room count Unadjusted and adjusted room count Differences in “rooms available” calculations Forecasting rooms available for sale Impact of overstays ,early arrivals, no-shows, and cancellations on rooms available for sale A working knowledge of overbooking issues Legal ramifications of overbooking Anti-service issues at stake Possible solutions 12

Forecasting Available Rooms – In-class Assignment Simple Room Count (Exhibit 4-2) Only accounts for basic issues Rooms available (A) = 2500 Occupied last night (B) = 2275 Expected Check-outs (C) = 625 Stayovers (D = (B-C)) = Today's reservations (E) = 900 Rooms committed today (F = (D+E)) = Rooms available for sale (A - F) = Occupancy percentage (F/A) = 13

Forecasting Available Rooms - In-class Assignment Adjusted Room Count (Exhibit 4-3) More sophisticated, accounting for many issues Computing Rooms Available Rooms available (A) = 2500 Occupied last night (B) = 2275 Expected Check-outs (C) = 625 Add Understays (6%) = + Subtract Overstays (2%) = - Adjusted Departures (C1) = Adjusted Stayovers (D1 = (B - C1)) = Today's reservations (E) = 900 Less Cancellations (2%) = - Less no-shows (5%) = - Add early arrivals (1%) = + Today's Adjusted Reservations (E1) = Rooms committed today (F = (D1 + E1)) = Adjusted rooms available for sale (A - F) = Anticipated occupancy percentage (F/A) = 14