overbookings

Overbooking is a common practice in certain industries, particularly in transportation and hospitality, where a company sells more reservations or tickets than it has available capacity. The primary goal of overbooking is to compensate for anticipated no-shows or cancellations. By selling extra spots, businesses aim to maximize their utilization of resources and prevent empty seats or rooms that would otherwise go unsold.

The practice relies on historical data and statistical analysis to predict the rate of customers who will not appear for their booked service. For example, an airline might overbook a flight by a certain percentage based on their average no-show rate for that specific route and time. Similarly, hotels might overbook rooms anticipating late cancellations or guests who don't show up.

While overbooking can be beneficial for businesses by increasing revenue and efficiency, it carries the risk of inconveniencing customers. If too many people show up and there isn't enough capacity, some customers will be denied service. This often leads to compensation for the affected customers, such as flight vouchers, hotel room upgrades, or rebooking on a different service, albeit at a potentially inconvenient time. The key to successful overbooking lies in accurate forecasting and effective management of the consequences when projected no-shows do not materialize.