Overbooking

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OverbookingSpecialization project-Hotel|
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Supervisor: Mette Kondrup| |
Class: 3 søk G| |
Name: Bianca Bara| Signature:|

Contents
1. Introduction2
2. Problem Statement3
3. Problem formulation3
4. Delimitations3
5. Methodology4
6. Analysis5
6.1 PEST Model5
6.1.1 Political environment5
6.1.2 Economical environment7
6.1.3 Socio-cultural environment7
6.1.4 Technological environment10
6.2 Customer perception towards fairness/unfairness- analysis11 6.3 The overbooking process13
7. Suggested solutions14
7.1 Advance planning14
7.2 Ask for volunteers14
7.3 Appropriate compensation15
7.4 Training the employees15
7.5 Policies17
8. Consequences of the suggestions18
9. Economic considerations18
10. Methodological criticism19
11. Conclusion19
12. Bibliography20

Introduction

Success in today’s world, threatened by the financial crisis, means making the best of each selling situation. The key to a successful business is to sell the right product to the right customer, on the right time, for the right price. More and more service companies, especially in the transportation and hospitality industry use revenue management to maximize their revenue. This practice (also called yield management) refers to tactics used by different businesses based on the analysis and prediction of consumer behavior having as purpose the development of a strategy which juggles with prices and creates higher profits. In the hotel industry, Bill Marriott was the pioneer of revenue management. The Marriott Organization researched the customer behavior and the demand for their variety of products. After research and analysis they determined that customer demand can be forecasted. After implementing this concept in all the properties, Marriott Organization increased their revenue with $100 million per year. Soon, hoteliers all over the world began to use revenue management techniques to increase their revenue. In other words, revenue management is a systematic process designed to increase revenue by considering demand, reservation scheduling and variable pricing. It consists of evaluating different pricing models and applying duration-management strategies, in forecasting, group management or pricing strategy. Another technique refers to overbooking and it is a standard practice in the lodging industry. This means that a hotel is selling more rooms than it has available in order to compensate for no-shows or cancellations. The objective is to reach the perfect fill (this happens when all the available rooms are sold). This is a challenge for hotels due to the fact that guests are undependable and this is why hotels are trying to predict consumer behavior.

Problem Statement

In spite of all efforts to reach this perfect sell-out, hotels either remain with unsold rooms or they have to walk guests away. In the case of hotels gaining profits, there is not a clear picture on how would customers feel when they arrive at the hotel and find out that there is no available room for them. According to a study about customers’ perception towards overbooking, it has been demonstrated that customers see this practice as unfair and this leads to dissatisfaction and the risk of losing them. If we see this situation on a long-term view, it can have a negative impact on the set goal of maximizing the revenue. Loosing loyal customers can interfere with the overbooking strategy and can lead to loss profit. Problem formulation

Selling the exact number of rooms would be a mistake and overbooking is becoming more and more a need. Focusing on issues related to overbooking, how can hotels improve the customers’ perception of unfairness towards...
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