During the recessionary 2008-09, as travel declined as a whole, so did the hotels occupancy rates (the proportion of hotel rooms occupied per year). To meet the operating expenses (since hospitality business has a significantly higher proportion of fixed costs), the hotel owners resorted to offering discounts and lower tariffs. This led to drop in Average Daily Rate (the average rate per night of hotel booking). The Hotels Bookings took a hit and adversely impacted the revenues for travel service providers.

Hotel Bookings offer markedly higher Revenue Margin (Revenue earned by the travel service provider as a percentage of the size of booking) at close to 25% compared to Air Ticket bookings (~3%), Cruises and Car Rentals (less than 10%). Hence, travel services providers make most profits from hotel bookings.

The hotels market in Europe and Asia is much more fragmented with smaller, independent lodgings compared to US, where the hotel market is dominated by large hotel chains. Hotel chains are more likely to offer online bookings through their own websites, while online travel agencies such as Expedia are more appealing to small, independent hotels outside US. Also, travel agencies stand to make higher revenue margins from independent budget hotels under their merchant business model. Hence, expansion into hotels markets in Asia and Eastern Europe presents a growth opportunity to US based online travel services providers.

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