Overbooking, in the travel industry, means selling or booking more tickets, seats, or rooms than are actually available. It can happen as a mistake due to poor inventory management or as a deliberate strategy to optimize capacity and revenue.
The overbooking strategy is based on statistical predictions about no shows and cancelations. For example, in aviation, airlines overbook flights expecting a certain number of passengers not to show up. This way, they try to fill up as many seats as possible and maximize revenue. If everyone who booked arrives at the airport and wants to board the plane, the airline usually offers incentives to volunteers willing to take a later flight.
In hospitality, hotels allow more reservations than are available, anticipating some guests will cancel or not arrive. If more guests arrive than the property can accommodate, the hotel might arrange an alternative lodging, usually at a comparable or upgraded property.
While overbooking can be financially advantageous for businesses, it may also lead to customer dissatisfaction if not managed properly. Businesses using this strategy must accurately predict the number of no shows and cancelations and have a solid plan for handling situations when more customers than expected show up.