Hotels in the United States are paying, on average, 16 percent to 18 percent to acquire customers, with many paying as much as 25 percent to 35 percent, according to two experts from Kalibri Labs. About half is paid to third parties and half is paid for direct expenses.
The company collected data for more than 25,000 hotels from big and small chains as well as independents from more than 100 brands with 3 million rooms in the U.S, tracking more than 5 billion transactions.
“At every stage along the revenue cycle where there’s more expenses and more hands in the till, you can see the industry gets a little bit less efficient,” Mark Lomanno, partner and senior advisor of Kalibri Labs, said during a recent webinar, “Examining Hotel Performance and the Growth of OTAs,” which was hosted by the Asian American Hotel Owners Association.
For the 12 months ending June 2016, guest-paid revenue saw an increase of 4.6 percent; hotel-collected revenue was up 4.5 percent; contribution to operating profit and expenses (COPE) revenue increased 4.3 percent; and net revenue rose 4 percent.
“If the industry was exactly as efficient in ’16 it was in ’15, that net revenue percent change should have been equal to the guest-paid revenue percent change,” Lomanno said. “In a market where they’re getting even more efficient, that number could be even higher.”
Another way to look at the data is to determine how much of the customer spend went to the bottom line, he said. In 2016, guests paid $146.9 billion on hotel rooms. Of that, $143.4 billion was reflected on hotel profit-and-loss statements.
“That means consumers spent $3.5 billion purchasing hotel rooms that never showed up on a hotel P&L,” Lomanno said.
When subtracting expenses associated with specific transactions, or the COPE revenue, the industry’s take is down to $134.6 billion, he noted. Then, if sales-and-marketing expenses are subtracted to get the net revenue, the take is down to $123.3 billion.
“Adding all those things together, the industry has spent about $23.6 billion getting the customer in the door, which is a fairly substantial piece of that pie,” Lomanno said.
Revenue capture is the net revenue as a percentage of the total guest-paid revenue. In the 12 months ending June 2016, the industry captured 83.9 percent of customer spend to apply to operating business and other expenses of running hotels, he said. That percentage declined slightly from the previous year (84.4 percent).
