U.S. Hotels Set for Boost From Robust Travel and Direct Bookings - Skift Travel News

Skift Take

Hotel companies want to reduce their dependence on online travel agencies, which charge high commissions. But as hotel rates rise and economies get shakier, consumers may prefer to do more comparison shopping.

Sean O'Neill

U.S. hotel operators are expected to post a rise in first-quarter profit even as they pour in money to lure travelers to make bookings directly through their websites, instead of turning to travel agencies.

While bookings have been getting a boost from increased business and leisure travel, the investments hotels have made to reduce their reliance on online travel agencies (OTAs), which tend to have higher marketing budgets, is eating into the gains.

Last year, U.S. hotels received about $49 billion from online direct bookings and $57 billion from OTA bookings, according to travel market research firm Phocuswright.

“During uncertain economic times, when travelers are looking to stretch their dollars as far as possible, OTAs can help drive demand,” Phocuswright’s senior analyst Madeline List said.

The Context

In recent years, hospitality giants like Marriott International Inc and Hilton Worldwide Holdings Inc have doubled down on their own loyalty programs as they attempt to spend less on commissions and other costs related to third party businesses.

Through these programs, the hotels promise exclusive perks to customers in the form of redeemable points for stays at specific hotels in their franchise, among other travel benefits.

However, in the face of an uncertain economy, travelers have increasingly relied on OTAs like Booking Holdings Inc, which give them a wider range of choices and prices to book from, alongside incentives like advance cancellation, as opposed to upfront payment.

“When the economy is weak and hotels may not be getting as much business from traditional sources such as corporate travel or meetings and conventions, they become that much more reliant on online travel agencies,” Atmosphere Research Group’s travel industry analyst Henry Harteveldt said.

Click to enlarge.

The Fundamentals

• Analysts expect Marriott’s revenue to rise 28.8% to $5.4 billion when it reports results on May 2; earnings per share is estimated to be $1.84
• Analysts expect Hilton’s revenue to rise 28% to $2.2 billion when it reports results on April 26; earnings per share is estimated to be $1.13
• Analysts expect Booking’s revenue to rise 40% to $3.8 billion when it reports results on May 4; earnings per share is estimated to be $10.67

For a Reuters graphic on U.S. travel operator’s stock performance, click here.

Wall Street Sentiment

• For Marriott, six of 23 brokerages rate the stock “buy” or higher, 16 “hold” and one “sell” or lower, as per Refinitiv data
• For Hilton, nine of 22 brokerages rate the stock “buy” or higher and 13 “hold”, as per Refinitiv data
• For Booking, 19 of 33 brokerages rate the stock “buy” or higher, 13 “hold” and one “sell” or lower, as per Refinitiv data

(Reporting by Priyamvada C in Bengaluru; Editing by Pooja Desai)

This article was written by Priyamvada C from Reuters and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to [email protected].

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