A new report from hospitality enablement technology firm Tambourine suggests that hotel revenues are slowing down because third party bookings are eating into incomes.
Citing data from the American Hotel and Lodging Association (AHLA), the report said that retained revenues after being adjusted for customer acquisition costs was reduced by almost .4% from 2014 to 2015, which is equivalent to $600 million.
“That $600M in additional cost would have contributed directly to net operating income. Using an 8% capitalization rate (which most investors require), these additional acquisition costs of $600 million reduced the asset value of the overall hotel industry by at least $7.5 billion,” AHLA was quoted as saying.
Tambourine said these costs are eroding profits and the overall value of hotel assets, with the situation “even more serious in markets with new supply and growing Airbnb listings.”
Revenues are further restricted as pricing power and occupancy plateau, all of which are pointing to a downtrend in revenue per available room (RevPAR).
To stem the revenue haemorrhage, Tambourine suggested that hotels need to reduce the fees they pay to third party booking sites and aggressively pursue campaigns that will boost higher margin direct bookings.
Tambourine added that online travel agents are a reality hotels must live with, and they can be leveraged as a tool for driving traffic to hotels. Once they get into the hotel’s turf, it is incumbent upon these enterprises to provide experiences that will compel customers to aspire for a direct relationship with the hotel, the report also recommended.
“Guests who book direct tend to be more loyal, spend more and stay longer,” Tambourine concluded.
Hotel stocks retreat in September
Hotel occupancy inches up to 70% in last week of September