Cash talks when overbooked hotel guests walk

Jun 07, 2011

Cash bonuses can help hotel operators lure back disappointed customers who were displaced during overbooking snags, according to Penn State researchers.

In an experiment, participants said they were more satisfied with than a voucher if they lost stays at a due to overbooking, said Breffni Noone, assistant professor of hospitality management.

"A lot of people in the hotel industry ask the question: 'What do I do to compensate customers who have been turned away because of overbooking?' " said Noone. "The results suggest cash-based overcompensation works best."

The researchers, who released their findings in the online version of Journal of Hospitality and Tourism Research, said that hotels and airlines typically try to overbook stays and flights because customers may not show up. These no-shows can cost these businesses revenue that can never be recovered, according to Noone.

"Hotels and airlines intentionally overbook because they will never get the opportunity back again," said Noone. "It's not like a that can pull products off of a shelf and put them back on later for resale -- when people don't show up, you don't have a chance to fill those rooms at a hotel or seats on an airplane again."

In the experiment, Noone measured how satisfied 212 potential hotel customers were with the industry standard compensation -- a free night's stay at a comparable hotel, transportation and a telephone call -- when it is combined with additional compensation in the form of either a voucher or a cash-based award. Vouchers are coupons that typically must be redeemed at the hotel or hotel chain. She also tested at three levels of overcompensation for a $200 a night hotel stay -- 50 percent or $100, 100 percent or $200, and 200 percent or $400.

Noone, who worked with Chung Hun Lee, in , said that cash-based overcompensation leads to higher satisfaction ratings than industry-standard compensation or voucher-based overcompensation. People were most satisfied with the 200 percent cash bonus, although the satisfaction level was not statistically significantly higher than satisfaction with the 100 percent cash bonus. Satisfaction with cash bonuses does not increase linearly as the amount increases, but appears to level off at a certain point.

Noone suggested that this indicates that an optimal level of overcompensation for booking errors may exist.

"The lesson seems to be that, at some point, throwing more money at the situation does not necessarily produce better results," said Noone. "Once you hit an optimal level, there's no reason to go farther."

Explore further: Entrepreneurs to venture capitalists: Don't be a Scrooge

add to favorites email to friend print save as pdf

Related Stories

Sustainability index could help managers compete

May 12, 2010

(PhysOrg.com) -- Researchers from Cornell and Boston University have developed a standard measurement of expenses for energy and supplies to be used as a sustainability gauge for the hotel industry.

Hospitality turns hostile with envious employees

Sep 28, 2010

Guest relationships can become collateral damage when hotel employees envy the relationships co-workers have with their bosses, according to an international team of researchers.

Virus hits DC airport hotel

Jan 19, 2007

Public health workers Friday tried to track down the source of a contagious virus that sickened guests and workers at a hotel near Washington.

Recommended for you

Over-identifying restrictions in economic analysis

Nov 25, 2014

The analysis of empirical economics has long made use of a tool called the generalized method of moments (GMM). This method is used as a generic way of estimating parameters in an empirical model where the ...

Tracking Chinese aid to Africa

Nov 24, 2014

Is a fancy new school in an African government official's hometown a coincidence, or evidence of systematic favouritism in the distribution of aid?

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.