Internet Generated $715 Million for U.S. Lodging Industry in 2003

According to PricewaterhouseCoopers
’ analysis, the Internet generated an average of 26,000 incremental rooms occupied per night and annual incremental room revenue of $715 million in 2003. This incremental gain was offset by a $1.99 billion loss for the U.S. lodging industry as a result of the Internet’s lower pricing effects. The net effect for the industry in 2003 will be a negative $1.27 billion.

Increased use of the Internet contributed to a decline of the branded hotels’ rate premium relative to independent hotels. Average daily rates for branded properties would have been $3.18 higher per occupied room night in 2003 than if there were no Internet effect.

“The Internet has reduced the asymmetry of pricing information between hotels and consumers and has reduced search costs,” said Bjorn Hanson, Ph.D., global industry leader, PricewaterhouseCoopers. “This has created a relative opportunity for independent hotels and had a more unfavorable effect on chain-affiliated hotels that have traditionally achieved a rate premium of about seven percent.”

In 2003, approximately 12 percent of lodging reservations were placed on the Internet, according to PhoCusWright data. According to PricewaterhouseCoopers research approximately 15 percent of these reservations were directly generated because of the Internet, as a result of advertising, pricing and ease of use.