We evaluate the effect of boundary layer losses on two-dimensional H2/O2/Ar cellular detonations obtained in narrow channels. The experiments provide the details of the cellular structure and the detonation speed deficits from the ideal CJ speed. We model the effect of the boundary layer losses by incorporating the flow divergence in the third dimension due to the negative boundary layer displacement thickness, modeled using Mirels theory. The cellular structures obtained numerically with the resulting quasi-2D formulation of the reactive Euler equations with two-step chain-branching chemistry are found in excellent agreement with experiment, both in terms of cell dynamics and velocity deficits, provided the boundary layer constant of Mirels is modified by a factor of 2. A significant increase in the cell size is found with increasing velocity deficit. This is found to be very well captured by the induction zone increase in slower detonations due to the lower temperatures in the induction zone.