Overbooking

Overbooking is the practice of selling more bookings or goods than can be accommodated. The intent is to offset the negative revenue effect of no-shows. For example, an airline overbooks a flight in expectation of a certain number of passenger no-shows. Similarly, a restaurant overbooks its seating reservations, since some patrons never show up for their reservation slots. A retail establishment may also engage in overbooking if it promotes a product at a discounted price, and does not keep a sufficient number of units in stock to satisfy demand, leading to the use of rain checks.

Some businesses minimize the need for overbookings by charging cancellation fees or making payments non-refundable, thereby providing an incentive for customers to follow through on their commitments.

Related Courses

Revenue Management 
Revenue Recognition