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OpenStack supports qcow2 images, and they're much smaller than raw disk images. Backport the upstream livemedia-creator support for qcow2 to the rhel7-branch.

Commit 07d5cb176d5b and b73aeb92a912b

Successfully created a qcow2 image using livemedia-creator from lorax-19.6.66-1.el7:

livemedia-creator --make-disk --iso /var/lib/libvirt/images/boot.iso --qcow2 --ks rhel7-livemedia.ks

Created disk image:

# qemu-img info disk7y8a3c.img 
image: disk7y8a3c.img
file format: qcow2
virtual size: 5.0G (5368709120 bytes)
disk size: 2.6G
cluster_size: 65536
Format specific information:
    compat: 1.1
    lazy refcounts: false

It was possible to boot the image using virt-manager.

Moving to VERIFIED

Since the problem described in this bug report should be
resolved in a recent advisory, it has been closed with a
resolution of ERRATA.

For information on the advisory, and where to find the updated
files, follow the link below.

If the solution does not work for you, open a new bug report.

https://rhn.redhat.com/errata/RHEA-2015-2289.html