05 Nov RevPar UP, Profit Down?
Recently Kalibri Labs (hotel performance platform) announced that in one study they conducted, although RevPar was up in New York City by 2%, Net RevPar was actually down by 1% due to higher acquisition costs for hotels – as reported by Hotel News Now. We’ve heard one-off anecdotal reports of similar circumstances in Canada. “Gross revenue up, but net revenue has been down”.
The most profitable channel is, of course brand.com – your website. Direct bookings resulted in a 98.99% contribution to operating profit and expense (COPE) So out of $100 of guest revenue, the hotel or resort keeps almost $99.
In contrast, the average acquisition cost for OTA’s was 19.8% for chains of less than 30 hotels. It is likely a few points higher for independent hotels & resorts. However, even at roughly 20% cost, only $80 of $100 in guest revenue is going to the hotel.
As a hotelier, this is unlikely news to you. Most hotels & resorts think there is nothing they can do about this steady decline in operating revenue due to OTA’s ever expanding reach.
Few Independent Hoteliers are calculating the aggregate cost of the OTA’s commissions. The average 100 unit independent hotel or resort breakdown looks something like this:
100 Units
32% bookings come from OTA’s (Smith Travel Research)
70% Occupancy
20% OTA commission
$150 ADR (average daily rate)
$245,280 Annual spend on OTA commissions.
This number is forecast to grow significantly in future years. What is your hotel doing about this erosion of net operating income & profit?
IndyKey helps independents:
- Drive direct bookings
- Bring back frequent guests more often
- Reward your most profitable guests
- Reduce OTA commissions
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