August 16, 2011

More on OTAs being a costly distribution channel for hotels


Travel Weekly is following up with some industry leaders on STR's recent estimated that OTA sales cost U.S. hotels $2.5 billion in potential revenue.

STR estimated that the OTAs accounted for about 7.2% of the approximately $120 billion in revenue realized by U.S. hotels in 2010. While that $2.5 billion figure has been pretty consistent over the past couple of years, it dwarfs the $1 billion that OTAs “cost” hotels as recently as 2004, said Mark Lomanno, STR’s chief strategy officer.

The cost is calculated as the difference between revenue a hotel would realize if it sold the room itself and the negotiated discounted rate it gets from the OTAs. The online agencies add markups of between 22% and 25%.

“It’s probably a fairly costly channel,” Lomanno said. “The only thing more costly is flash sites like Groupon.”

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