Hotels & Motels NAICS 721110

Apr 22, 2025 - Online Travel Agencies Can Boost Hotel Profitability

• Hotels that pay commissions to online travel agency (OTA) platforms get strong financial returns of their own as a result, based on a Smith Travel Research analysis of sales data from about 650 US hotels. Historically, hotels are not big fans of paying commissions to third party sites because their effect on profitability can be ambiguous. In addition, most OTAs commissions are anywhere from 30-50% for every room booking. The worry might be unwarranted as Smith Travel’s analysis shows that for every dollar spent on OTA commissions, a hotel sees a boost of 1.1% in occupancy rates; a $20.20 increase in revenue per available room; and an EBITA gain of $7.08. However, the data found that the same situation does not play out at economy hotels, with OTA commissions having a negative impact on occupancy rates and revenue per available room.
• Hotel stocks have been battered in April following the announcement of broad-based US tariffs, with the Dow Jones Hotel Index falling 6% the day after the tax levies were announced on April 2, 2025. Combine that with sinking international travel bookings to the US and the travel industry is sounding the alarm. Axios found that travelers passing through customs at the country’s 10 biggest airports have fallen 20% by late March. Fewer travelers mean fewer stays in the country’s hotels. Hotels benefit big from international travel and major cities throughout the US will likely be hammered by depressed travel from Asia, Europe, and Canada. The hotel industry was already dealing with a labor shortage and has increased wages to compensate. If operational expenses keep rising (hotels buy lots of things like towels that are never sold to guests), revenue per available room will eventually take a bit hit.

• High construction costs and a tough financing market have depressed growth in US hotel room supply, according to a report from travel industry news provider Skift. As of September 2024, hotel room supply in the US rose about 0.5% for the year but still fell well below the average 1.3% the industry recorded before the 2020 pandemic. The decline in rooms being opened has been stark - there were 73,000 hotel rooms being opened in September 2024 versus 127,000 rooms in June 2021. While the pipeline of future hotel room construction went up 13% through September 2024, Skift notes that the number is slightly misleading since the growth is driven by “planned” hotel rooms instead of ones that are already under construction. In-construction hotel rooms have fallen 25% over the last four years.
• Employment in the hotel industry grew 1.7% year over year in December, per the US Bureau of Labor Statistics, but that still remains below pre-pandemic levels amidst an ongoing industry-wide staff shortage. The hotel industry lost about 680,000 jobs during the pandemic, and in the four years since has added back 467,000 employees (68%), according to data analysis from The American Hotel and Lodging Association (AHLA). Retention of the industry’s 2.1 million workers will be a key focus for hoteliers in 2025, according to AHLA, with employers stressing an increase in total wages, compensation, and advancement opportunities. A survey of hotel owners by AHLA in December 2024 found that 64% currently have staffing shortages. The top employer methods cited to reverse the trend included pay raises (47%), flexible work schedules (19%), and offering employees steep hotel discounts (13%).