Simon Calder: Why both sides profit from overbooking

The man who pays his way

Three virtues of 21st-century civilisation: education, sanitation and overbooking. You may have reservations about the last of these, but bear with me. The travel industry's custom of selling the same seat or bed more than once is not an example of unashamed greed. It represents a sound business practice that brings benefits to many, particularly those who have reservations.

Late on Wednesday evening I boarded the good ship Bergensfjord in the Norwegian port of Stavanger. For the past 18 years she has sailed to the Danish port of Hirtshals. This is her last summer on the run: she is due to be replaced next May by a superferry, offering many more than the 212 cabins aboard the present ship. Meanwhile, a congregation of scout troupes and business travellers, Scandinavian families and stag parties cram aboard. Not all of them are guaranteed a good night's sleep.

As the ship prepared to sail, the purser offered 3,000 Norwegian krone (£330) to any passenger prepared to relinquish their cabin. Based on previous experience, Fjordline had estimated that four bookings for cabins would be "no-shows". Therefore four extra parties of passengers were allowed to book than the number of cabins available. Had the company guessed right, it would have earned an extra £200 from each twice-sold cabin.

As it happened, on the eve of the Ascension Day holiday, everyone showed up. There were no confrontations, because the issue was handled by throwing money at it. Enough people were prepared to accept a cash sum way above what they had paid for their cabin for the problem to vanish as quickly as the Norwegian mainland behind a veil of North Sea murk.



Travel is not like other industries. The seats and beds that it produces are for rent, not for sale. Every night a room goes unoccupied, and every time a train, boat or plane departs with empty space, potential income has been lost forever.

Travel customers, too, are unusual: they may fail to take delivery of the transportation or accommodation they have booked. That is rarely forgetfulness. It happens either because there is no penalty for being a "no-show", for example on expensive airline tickets or pay-on-departure hotel rooms, or because the penalty is so heavy (often 100 per cent of the price paid) that there is no point in cancelling when your plans change.

Overbooking addresses these phenomena, and helps allocate scarce resources efficiently. An airline flying a 400-seat Jumbo jet from Heathrow to Australia on the last Saturday before Christmas can help to satisfy the heavy demand by selling 20 seats twice. If the airline's planners are right and 400 people show up, its bet will pay off to the tune of around £20,000. And the last 20 people to book, who were sold seats that were theoretically already filled, will get to travel on the flight they wanted.

Should the prediction go awry, the bidding begins. The airline needs to raise its compensation offer to the point at which enough passengers will postpone their trips to accommodate the "oversell". The only time overbooking becomes a problem is when companies are insufficiently generous. The standard offer from Virgin Atlantic, I understand, is a return ticket to anywhere the airline flies – except Sydney.

Experiencing a rude awakening in Norway

Stavanger, where I spent the first half of the week, is a friendly, hospitable port. At this time of year a prime destination for cruise ships. The harbour is big and deep enough to accommodate two gargantuan cruise ships at once, whose passengers find themselves only a few steps away from the clapboard buildings that line the quayside and clamber prettily across the city. But those of a sensitive nature should look away from some of the shopfronts in Stavanger's profane precinct.

Most hairdressers, as you know, rely on dismal puns to promote their business. Stavanger has one, called "Hair and There". But around the corner is the upstairs salon apparently aimed at customers unhappy with their locks: it is called "Cut The Crap".

Almost opposite stands a boutique that appears to be thriving despite its name. This Norwegian designer store invites customers to demonstrate to the world "I'm wearing S*** clothes".

Should you feel that the best souvenir of Stavanger would be a tattoo, then hurry along to the parlour just up the hill; get there too late, and the sign outside instructs you to "F*** off, we're closed".

Have you tried new the Independent Digital Edition apps?
Travel
ebookHow to enjoy the perfect short break in 20 great cities
Independent Travel Videos
Independent Travel Videos
Simon Calder in Amsterdam
Independent Travel Videos
Simon Calder in Giverny
Independent Travel Videos
Simon Calder in St John's
Independent Travel Videos
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Travel

    Recruitment Genius: Graphic Designer - Product Development

    £26000 - £29000 per annum: Recruitment Genius: The Product Development departm...

    Recruitment Genius: Assistant Manager - Visitor Fundraising

    £23000 per annum: Recruitment Genius: The Visitor Fundraising Team is responsi...

    Recruitment Genius: Developer

    £30000 - £35000 per annum: Recruitment Genius: This is an opportunity to join ...

    Recruitment Genius: Estates Contracts & Leases Manager

    £30000 - £34000 per annum: Recruitment Genius: The Estates Team of this group ...

    Day In a Page

    The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

    The Silk Roads that trace civilisation

    Long before the West rose to power, Asian pathways were connecting peoples and places
    House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

    The honours that shame Britain

    Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
    When it comes to street harassment, we need to talk about race

    'When it comes to street harassment, we need to talk about race'

    Why are black men living the stereotypes and why are we letting them get away with it?
    International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

    International Tap Festival comes to the UK

    Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
    War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

    Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

    Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
    Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

    'A subversive brothel keeper and Communist'

    Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
    Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

    BBC heads to the Californian coast

    The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
    Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

    Victorian fraudster who shook the Bank of England

    Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
    Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

    Car hacking scandal

    Security designed to stop thieves hot-wiring almost every modern motor has been cracked
    10 best placemats

    Take your seat: 10 best placemats

    Protect your table and dine in style with a bold new accessory
    Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

    Cook not the only one to be caught in The Oval mindwarp

    Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
    Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

    Can Benitez get the best out of Bale?

    Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
    Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

    Beijing witnesses new stage in the Jess and Kat rivalry

    The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
    Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

    Jeremy Corbyn interview: A shrewd operator desperate for power

    His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
    Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

    Isis executes Palmyra antiquities chief

    Robert Fisk on the defender of the ancient city's past who was killed for protecting its future