Hospitality Sales and Marketing Association International
Hospitality Sales and Marketing Association International
 
Hospitality Sales and Marketing Association International
Diversity of Business Mix and Impact on Profit Contribution

There remains a wide range of channels and segments through which hotels receive their business, and this diversity is important for hotels to leverage as they deploy resources to acquire their customers. There have been shifts in this mix of channels and segments that have had direct implications for profit contribution. The most notable is the transfer of bookings from Property Direct (drive-in, call-in), to the OTA channel. That change is particularly evident in the Middle and Lower Tier hotels, or Upper Midscale, Midscale and Economy chain scales, causing a reduction in Revenue Capture. On the other hand, Upper Tier hotels, or Luxury, Upper Upscale and Upscale chain scales, managed to shift within the OTA channel to improve profit contribution by dramatic reductions in Opaque OTA business while growing the Brand.com business yielding higher Revenue Capture.

Revenue Capture, or the percentage of revenue hotels retain after all customer acquisition costs are paid, has declined from 84.4% in the 12 months ended June 2015 to 83.9% in the same period 2016. This represents $729 million that U.S. hotels could have retained

Managing this diverse mix is at the root of what hotels can do to improve their profit contribution. Each hotel has a wide range of channels and segments available in its market and can tap this to get a healthy balance of business at the lowest cost possible. This target, based on each hotel’s market situation is referred to as the hotel’s unique Optimal Business Mix and achieving that objective will be explored in detail in Part III of Demystifying the Digital Marketplace, which will be published later this year.

Excerpted from "Demystifying the Digital Marketplace: Spotlight on the Hospitality Industry," produced by Kalibri Labs through the AH&LA Consumer Innovation Forum and published by the HSMAI Foundation. Visit http://www.ahla.com/DDM/ to access this report available to HSMAI members. Use code: HSMAI2016