U.S. Hotel & Lodging: Loyalty Rates Make Impact
The U.S. hotel industry remains healthy, reaping the benefits of stronger economic growth and increased demand. Good fortune should continue, as forecasters predict record occupancy for U.S. hotels to last throughout the decade. However, a series of challenges continues to stall growth in average daily rate (ADR), such as increased supply, the impact of discounted loyalty rates and pressures from private accommodation.
Room revenue gains fell to in 2016, following two years of impressive growth of high single digits. The hotel segment is projected to see YoY gains over the next few years. Regardless of a slowdown, hotel ADR continues to outpace GDP by a healthy margin.
The distribution landscape remains challenging as hotels must deal with two powerful OTAs in Expedia Inc. and Priceline. Efforts to bypass OTAs with "Book Direct" campaigns have had limited effect, as more consumers continue to prefer OTAs for hotel booking. Regardless, some hotels have renegotiated with the OTAs to achieve lower commissions and other concessions, indicating that both parties are working together to achieve a balance in online channel distribution.
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