Frank McEvoy ,a Craig-Hallum Capital Group senior research analyst, said that as a result LodgeNet could see a yearly revenue loss of $25 million, assuming about 50 percent of LodgeNet’s guest entertainment revenue at these hotels is derived from porn.
Sioux Fall, S.D.-based LodgeNet, in a response to McEvoy's report, said it has worked with its largest hotel customer, which it did not name, to adjust its "economic model" in such a way to assure it remains "economically indifferent" regarding the hotel's decision to offer adult videos. The hotel in question has an option to restrict adult content beginning in 2013.
LodgeNet added that no existing agreements are affected and it doesn't expect any economic impact as a result of the agreement in either 2011 or 2012.
"The company's ongoing relationship with the customer in question is good, and LodgeNet is actively engaged with the customer in discussions regarding the upgrade of their existing systems to high-definition and providing new services that would generate incremental revenues," it said in a statement.
LodgeNet said it has always offered hotels options to restrict adult content and that “it has been widely disclosed the company has been diversifying its revenue base and is less reliant on revenue from mature content than at any point in the past."
