However, net revenues will increase only slightly.

According to PricewaterhouseCoopers U.S. lodging industry research, Internet bookings are expected to almost double in share of total demand from 13 percent in 2003 to about 24 percent in 2005, however net revenues from internet usage will increase only slightly. The research indicates that internet revenue will total $1.66 billion* for the year, only approximately $400 million more than 2003.

In 2005, PricewaterhouseCoopers estimates that the Internet will contribute incremental gains of 45,000 rooms per night and $1.24 billion for the year. In comparison, in 2003, the Internet contributed 26,000 rooms per night and $715 million in incremental revenue.

There are two main reasons for the only slight increase in net internet revenue: (a) the changed business environment (recession/downturn in 2001-2003 to expansion in 2004 and 2005) and (b) recent changes by hotel companies to manage yield and inventory on the Internet.

"By 2005, the lodging industry will have been in expansion for five to nine quarters, with rising occupancies and average daily rates," said Dr. Bjorn Hanson, global practice leader of PwC's Hospitality & Leisure practice. "And, many chain management companies and franchisors will have launched programs designed to maintain rate integrity and manage inventory across all channels. This will result in more rooms being distributed through the Internet, but fewer hotels resorting to discount websites to increase room night sales."

This effective channel management by hotel companies will result in smaller discounts available on third-party websites. In addition the profile of new Internet bookers in 2004 and 2005 will be made up approximately equally by ‘convenience bookers' and ‘discount seekers.'

According to PwC's research, just as increased room availability became more easily transparent to industry participants researching competitors' rates on the Internet during the recession, tight occupancies will also become transparent during the period of expansion. "The Internet may even help accelerate any rate increases during periods of tight demand," Dr. Hanson added.

*The figure does not take into account the cost savings associated from a shift in Internet bookings towards proprietary web sites.

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