The overbooking problem in hotels with multiple tour‐operators

Abstract

Examines the practice of overbooking at hotel and tour operator levels. By accepting more reservations than their available capacity, hotels hedge against the problem of cancellations. Hotels located in popular tourist resorts, allocate their capacity to multiple tour‐operators who through the vacation packages they offer, fill the hotels’ capacity. Shows that for this type of hotel, an overbooking policy applied at the hotel level and derived using the capacity of the hotel as a whole, gives better cost savings than when formulating an overbooking policy for each tour‐operator separately. The result of the analysis provides significant managerial implications since a hotel dealing with multiple tour‐operators, in devising its overbooking policy needs only to consider the occupancy of the hotel as a whole and not the performance of each tour‐operator. This simplicity is further reflected in the reduction of information required to be recorded.