They are the backbone of any hospitality industry because most of them are involved in the business of booking and selling of rooms. The reservation of rooms can be classified into two broad categories, namely the guaranteed reservation and the non-guaranteed reservation. These two concepts are very closely linked to each other and it is important for the members of the hotel or any other lodging business to clearly distinguish between them.
Guaranteed Room Reservations
A guaranteed room reservation means that the hotel guarantees the room to a specific guest with or without arrival or any other circumstance. Normally the guest is supposed to tender a credit card to hold the booking. Here are some key things to know about guaranteed reservations:Here are some key things to know about guaranteed reservations:
- Payment Guarantee: Guaranteed reservations involve the client having to put his credit card number while making a reservation for the room. In this case, the card of the guest is debited for an amount equivalent to the cost of one day stay even if they never arrive at the hotel. This also guarantees that the hotel has an income through the sales of meals.
- Higher Commitment: They indicate a longer-term perspective towards the booking from the side of the guest. Since the card is charged when they are not there then, they would be willing to go or at least call to cancel if their schedules have changed.
- Better for Hotels: Guaranteed reservations ensure that hotels curb instances of clients failing to show up, thus minimizing on losses made. As for the room, the hotel does not lose anything if they get an early cancellation because they can easily resell the room to another guest.
- Room Assignments: In the case of guaranteed bookings, instead of having rooms held by unidentified names, the hotel can proceed with selecting certain room numbers. This allows better planning.
- Advantageous Rates: Promotion and availability of cheaper rates to any hotel ensures that guests who book for accommodation are booked well and advance. n last minute guaranteed bookings offer could be the best bargain.
The other conventional guaranteed reservation is the ‘guaranteed late arrival’ whereby the guest’s card will only be charged if he or she has not checked-in by normally 6 a. m. of the day following the predicted arrival date. They have to dial and let the staffs of the concerned hotel know that they will be arriving late.
Altogether, the idea of the guaranteed reservations provides more reliability and certainty to the room availability and the revenues for the hotels. That is why hotels prefer and give their recommendations to such profiles.
Non-Guaranteed Reservations
It is called non-guaranteed reservation because the guest does not guarantee that he will check in at that particular hotel. Here are the key characteristics:Here are the key characteristics:
- No Payment: Signing up on the website of the hotel does not necessitate the provision of credit card details by the guest. There is no carrying forward of any type of capital expenditure with regard to the room.
- Higher Risk of No-Show: There is no downside to not attending and since there is little to no downside, guests themselves have less incentive to pencil it in and commit or cancel in advance if they are unable to. This contribute to the no-show risk.
- Harder to Plan: The revenue from non-guaranteed reservations is highly unpredictable because it is difficult for the hotels to guess whether guests will show up or not. New issues emerge when it comes to arranging the rooms for planning, staff, provisions, etc.
- Can be Cancelled by Hotel: When demand is high and the hotel is fully booked there is often a practice of shifting priority to guests who have guaranteed reservations and denying access to other guests. Guaranteed bookings take priority.
- Used for Special Cases: Some reservations are made by guests who expect different billing conditions such as government employees, diplomats, VIPs, corporate and organization bookings that make non-guarantee reservations. Policies can be flexible.
Non-guaranteed reservations can be a more limited commitment but they are also beneficial for guests. They do not expose themselves financially if they have a change of mind last minute. The hotel on the other hand suffers the loss on no-shows than adopting this strategy, The hotel… Non-guaranteed reservations may be changed or cancelled without penalty by the guest, but there may be stipulations which vary by hotel, such as deadlines for the changes or cancellations which range from 24 to 48 hours prior to check-in.
In conclusion, it can be said that the guaranteed reservations help the hotels to guarantee their income, while non-guaranteed ones give more freedom to the guests. Conventionally, most hotels act in a manner which seeks to increase the proportion of guarantee sales to non-guarantee. However, both play equally significant roles in negotiating hotel room rates.
Other Key Differences
There are some other key ways guaranteed and non-guaranteed reservations differ beyond the financial commitment and booking priorities:There are some other key ways guaranteed and non-guaranteed reservations differ beyond the financial commitment and booking priorities:
- Guaranteed reservations also enable a client to specify the kind of room or location, while non-guaranteed reservations do not have this feature. It means that no matter which country you arrive, you get what is offered to you.
- Basic information of a given guaranteed booking may include specific dates, number of rooms, among other factors and altering such information is normally in accordance to different cancellation and modification policies. The non-guaranteed ones, as a rule, allow for more freedom as to altering specificities.
- For guaranteed reservation, accommodation type, special diet, and other requirements like extra beds can be provided at the time of booking. Concerning other requests it is worked depending on availability for non-guaranteed ones.
- It reduces the guest loyalty program members’ rewards points and the type of benefits they may receive depending on the guaranteed bookings. Some promotions do not guarantee reservations for all customers; rather, some may block tables to a particular group of people.
- Any payments made in advance, down payments and deposits towards charges on the rooms can only be made in circumstances where the rooms are prebooked. Non-guaranteed ones make payment by accepting cash on the bill at the end of the service.
Restricted or essentially guaranteed reservations are flexible for your booking and specific while the open ones work on a more available list and hotel policy basis.
This paper aims to explore how hotels handle both the guaranteed and non-guaranteed bookings from customers.
There are several methods of reservation and both guaranteed and non-guaranteed reservations are efficiently handled by specialized software known as Property Management Software (PMS) used by hotels. Here is an overview:
- In the case of a new guaranteed booking, the PMS pre-allocates the accommodation inventory and can provide an exact room number right away. These are the bookings that just provide a notification of demand only.
- Ideally, revenue managers work closely and analyze the guaranteed and non-guaranteed reservation pipelines on a daily basis by time periods. Non-guaranteed demand is also useful for the company in terms of developing the correct pricing strategy.
- If those assured sales are almost touching the maximum occupancy, hotels strategically overbook since a certain percentage of guests are likely to fail to show up. Overbooking is particularly dangerous with non- guaranteed bookings since customers cannot demand their portion as guarantors do.
- Revenue managers also identify statistic data on no-show in order to be able to predict the availability of rooms which results from both types of bookings.
- Usually, hotels can cease taking non-confirma- tions at some stage when the hotel occupancy reaches nearly 100% while continuing to accept confirmed business which is supported by credit card guarantee.
- Fully automated pre-arrival follow up messages are sent to all guests several days prior to arrival date asking them to confirm or cancel their reservations particularly to non-reconfirmed or non-recoverable reservations.
- There are usually deadlines beyond which the hotels will not allow any changes and cancellation without incurring in certain penalties especially for confirmed bookings
The characteristic that would substantially influence overall revenue and occupancy is hotels’ capacity to manage both types of reservations effectively and switch between them. In essence, the right mixture needs to be obtained in order to deal with the issues of dilution.
Overbooking vs. Overselling
Overbooking and overselling are terms sometimes used interchangeably but refer to slightly different revenue management tactics:Overbooking and overselling are terms sometimes used interchangeably but refer to slightly different revenue management tactics:
- Overbooking means agreeing to provide a number of rooms more than are available for the night in question. Rather than risk losing all the participants, a certain percentage of no-show is anticipated.
- Overselling involves making more sales of accommodation than the total number of rooms, through using the no-shows and cancellations from the guaranteed and non-guaranteed rooms. The risk is higher.
The two strategies exploit on the reservation ambiguities to invoke occupancy and subsequently, more revenues in the long run. Overbooking is one of the standard techniques used in hotel revenue management where hotels allow a small margin over the number of rooms available to meet the demand. However, disciplined overselling is less safe and can turn into a disaster if travelers arrive more than actual rooms available – this causes guest dissatisfaction and operational issues.
Best Practices for Hotels
Some best practices hotels implement to manage reservations better include:Some best practices hotels implement to manage reservations better include:
- Ensure to give some form of guarantee because of assured bookings and give some form of offer such as a lower rate, free points etc.
- Set service modification /cancellation policies that are fair and acceptable to both the hotel and the customer. Offer any guaranteed bookings with a cancellation policy that is refundable once the cut-off point is reached.
- Select block rooms for people who check in late in the day or if there are oversold rooms that force people to search for other hotels.
- Apply the overbooking models with reference to past practice but do not overemphasize the models. Monitor guaranteed bookings daily.
- Act earlier to decline non-guaranteed reservations as the occupancy approaches the property’s full capacity. Give guaranteed bookings precedence.
- Remind customers of the reservation and reconfirm their bookings in the days leading to check-in dates. Call key accounts.
- Implements yield management through the use of software, which enables constant tracking of pick-up and pace of bookings by room type, period, segment, etc.
- Conduct training with front desk personnel on how to be polite when rejecting guests due to too many bookings for the property plus guests walk.
This is a very crucial aspect of hotel revenue management where an organization has to find a perfect balance between the assured and the non-assured bookings. The skill of the science behind it is a strong marketing and operational tool for hotels and it helps them to get a competitive edge."
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