Chapter § 4.05 DISHONORING RESERVATIONS: HOTEL OVERBOOKING

• Jurisdiction: United States
• Publication year: 2021

§ 4.05 Dishonoring Reservations: Hotel Overbooking

A common problem experienced by travelers is having confirmed reservations dishonored on arrival at the hotel. This practice, known as hotel overbooking, is common on the hotel business, where hotels consistently sell more rooms than are available at any given time.⁶²¹ In addition, hotels may fail to honor room reservations contracts with tour operators, conference planners and others.⁶²² It is estimated that many hotels accept from between 5% to 15% more advance reservations than they have rooms available.⁶²³

The hotel industry explanation for overbooking is that there are a certain number of travelers who make reservations and then either cancel or do not show up. According to the industry, this hotel "noshow" problem justifies intentional overbooking and justifies the discomfort and dislocation experienced by the traveler.⁶²⁴ This explanation is not well received by the traveler who has obtained a confirmed reservation, travels many hours, arrives at the hotel worn and weary and is denied a room because the hotel management has deliberately oversold the hotel. Recently, hotels have instituted tough cancellation policies requiring consumers to pay for the rooms they reserve but don't show up for.⁶²⁵

There is another explanation of hotel overbooking which comes closer to the truth than the industry's self-servicing apologia. Hotel overbooking is part of a referral system based on large scale "bait and switch" schemes. In any given vacation area there are many hotels. Some hotels have attractive locations on the beach or close to local sites of considerable interest. Not all hotels have such highly marketable qualities and may be located many miles from tourist attractions. In this situation it is not uncommon for the less attractive hotel to enter into an arrangement with the attractive hotel. The attractive hotel decides to sell accommodations to all travelers who request them. When the traveler arrives he is informed that there is no room available. He is also informed that there is space available at the less attractive hotel. In essence, the attractive hotel is the "bait" and the less attractive hotel is the "switch." For each traveler referred, the less attractive hotel pays the attractive hotel a commission.⁶²⁶

Most travelers will make hotel reservations prior to arriving at the vacation locale. Reservations can be made through travel agents, independent contractors, representatives or directly with the hotel. Typically, the hotel will require advance payment for the accommodations prior to "confirming" the reservations. There is little doubt that a confirmed reservation constitutes a valid contract for the purchase and delivery of a room. The dishonoring of a reservation is, at the very least, a breach of contract. As for the measure of recoverable damages in a breach of reservations action, the courts are presently divided.⁶²⁷ Overbooking may also involve negligence and possibly fraud. There are, however, few reported cases which have alleged and proven negligence and fraud. The reason is simple enough. The traveler's attorney has not bothered to expend the time and effort necessary to prove these causes of action. In fact, if negligence and fraud can be proven, substantial damages can be recovered.⁶²⁸

[1] Breach of Contract

A promise by a hotel to deliver a room in the future in return for payment or a promise to pay constitutes a binding contract. The hotel is obligated to deliver the room and the traveler is obligated to pay for it. When a traveler makes a reservation and then cancels, the hotel has a cause of action against the traveler⁶²⁹ and the traveler may be subject to a cancellation penalty.⁶³⁰

Hotels, however, can use the practice of overbooking to avoid bringing time consuming suits against travelers. The traveler has no analogous mechanism by which to cover his losses when the hotel breaches the contract. The traveler whose reservations have been denied is left holding his luggage in a strange town. He cannot make several reservations with several hotels in the same locale because to do so would require advance payments to each hotel. In essence, a breach of the reservations contract will cause greater...