At AAHOA, hoteliers learn how expensive it is to acquire customers

NATIONAL HARBOR, Md. — It’s no longer enough for hoteliers to set targets for revenue in 2018. Now they should be setting targets for the cost of making sales. That’s the message Cindy Estis Green, CEO and co-founder of hotel revenue performance analyst Kalibri Labs, delivered tthis week at the Asian American Hotel Owners Association's 2018 annual conference, here at the Gaylord National Resort & Convention Center.

According to Green, hotels earned roughly $155.2 billion in guest-paid revenue in 2017. But in order to make that money, hotels spent an estimated $25.2 billion to acquire guests, retaining a significantly lower $130 billion (a metric Kalibri Labs refers to as “revenue capture”). Vast swaths of these expenses are impossible to avoid, but many are the product of online travel agency fees and other concerns, which, with a little bit of strategizing, can be mitigated.

One way hotels are managing this is by promoting direct bookings. In 2017, Green said hotels pulled in 22.6 of their overall bookings from brand.com, while OTAs brought in only 13 percent. At first blush, this seems like a remarkably positive trend, but hotels’ revenue capture actually decreased from 2015 to 2016. In 2015, hotels’ revenue capture was recorded at 84.3 percent, but it fell to 83.8 percent the following year. These metrics, however, were recorded before the hotel industry began a concerted push to increase direct bookings.

“The book-direct campaigns are big, and have been very effective at increasing brand business,” Green said. “Brand business will always be better for your bottom lines, and the health of the industry.”