The Effect Of Perceived Fairness Toward Hotel Overbooking And Compensation Practices On Customer Loyalty

Purpose - The purpose of this paper is to investigate the. effect of hotel overbooking and compensation practices on customers' perceptions of fairness and loyalty and examine the effects of customer gender, reservation time, membership status, length of stay, payer source, and reservation channel on perceived fairness toward overbooking.Design/methodology/approach - The study utilized a scenario-based survey on grocery shoppers to identify relationships between overbooking, fairness and loyalty.Findings - The findings show that customers who perceive a hotel's overbooking and compensation practices to be unfair are less likely to be loyal to the hotel in the future. Women were more likely than men to perceive the practice of hotel overbooking as unfair. All other factors had no effect on customers' perceptions of fairness.Research limitations/implications - A longitudinal field study that collects response from real hotel guests being bumped should be considered for future studies about customers' reactions to the consequence of overbooking. Practical implications - Considering the invisible cost of overbooking, it is important for hotels to consider additional compensation policies to help positively influence walked customers' perception of overbooking and thus their loyalty and ongoing patronage.Originality/value - This is one of the first research papers looking at the invisible costs of overbooking in terms of customers' long-term behavior by addressing questions of whom to walk and how to compensate the walked.