Overbooking

Overbooking is the practice of selling more reservations or tickets for a service, such as a flight, hotel room, or event, than the actual capacity available. This is done intentionally by businesses to account for cancellations, no-shows, and to maximize their revenue. If everyone holding a reservation or ticket arrives, some customers will be denied service, often resulting in inconvenience, stress, and potentially compensation for the affected individuals. The practice involves statistical analysis and risk assessment to balance profit maximization with the potential costs of denied services.

Overbooking meaning with examples

• The airline was notorious for overbooking its flights, hoping to offset losses from last-minute cancellations. While most passengers boarded without issue, on several occasions, families were left stranded. The company offered compensation to those bumped from the overbooked flight, but the disruption was substantial and frustrating for those affected, particularly during holiday travel.
• During peak season, the hotel chain routinely implemented overbooking. Guests with guaranteed reservations were occasionally relocated to alternative accommodations, which was often in a lower-rated hotel some distance away. Management defended the practice, citing the need to maintain high occupancy rates and cover fixed costs, but faced customer complaints.
• The concert promoter was careful not to overbook the stadium. To avoid overcrowding and safety concerns, the event organisers made a careful estimate of likely attendance based on ticket sales, knowing it was often lower. They even factored in the potential for weather and alternative forms of transport.
• A cruise line's overbooking strategy involved carefully tracking historical no-show rates, offering incentives such as upgrades, refunds, or vouchers to those willing to voluntarily disembark in case all guests arrived. The financial calculations determined the probability of empty cabins in the event of no shows against the cost of denying a service.