Overbooking is the practice of intentionally accepting a number of reservations for a service to be rendered, such as a seat to travel on a commercial airline flight or a stay in a hotel room, which exceeds the maximum available capacity. Businesses assume that at any given time, some individuals will cancel their reservations and therefore overbook to both minimize waste in operation or maintenance costs and to maximize ridership or occupancy and profitability.
Airlines are typically permitted to engage in overbooking, subject to certain limitations. For example, when an airline gives boarding priority to passengers on a standby list and denies boarding to passengers with confirmed reservations, this gives rise to a cause of action. Mendelson v. Trans World Airlines, Inc., 120 Misc.2d 423 (1983). Airlines are also obligated to offer a rider that has been denied boarding due to overbooking either alternative transportation or compensation, usually travel vouchers or money. A passenger that refuses either offer may also choose to sue.
[Last updated in August of 2020 by the Wex Definitions Team]