GLOBAL REPORT—Airport hotels are proving sound investments, as in many cases these properties command a significant rate premium and enjoy stronger demand than competitors located farther afield, according to sources.
While there are few hotels physically attached to airports, even those properties just a quick shuttle ride away can see the considerable benefits of their locations.
According to STR, U.S. airport hotels posted a 9.1% increase in revenue per available room through the first seven months of the year, after posting a similar growth rate of 9.3% during the same period in 2014. This is largely attributed to strong, steady occupancy (75.5% through July 2015), which allowed operators to keep pushing average daily rate, which was up 7%. (STR is parent company of Hotel News Now.)
Hotels in the U.S. overall reported a RevPAR increase of 7.4% for the comparable period, while ADR was up 5%, according to STR.
“It goes back to the convenience. People will pay more (for an airport hotel), especially when you get into situations where flights are delayed or cancelled,” said Tom Curley, GM of the new Westin Denver International Airport, which enjoys a rare distinction of actually being located within a terminal.
“There’s a certain amount of convenience to be able to walk a minute-and-a-half away and be settled into a hotel. … You’ve got to go 10 miles from us to get to the closest full-service property, so we’re able to offer a full range of amenities and services that you’d have to travel some distance to get otherwise,” Curley said.
The 14-story Westin property—which opens 19 November—is owned by the Denver airport and managed by Westin. This type of partnership generally exists only in the major cities/main airline hubs. The Westin is the first attached airport hotel of its kind to be built in the past 10 years, since the Grand Hyatt DFW, located at Dallas Fort Worth International Airport Terminal D, Curley said.
Such deals typically are more complicated, involve a more nuanced development process and are much more expensive, sources said.
“There’s some type of deal being made between the airport and the brand attached to the hotel,” said Gina LaBarre, VP of Americas brand management for Crowne Plaza Hotels & Resorts. “The real estate in an on-airport property is going to be significantly more expensive than what you’d find in the suburban market. It’s a different sale for putting the hotel in there, but it should not operate much differently than one located in the airport’s vicinity.”
Passengers and premiums
Most owners look for properties within a cluster of airport hotels near the terminal but just outside airport grounds, especially in smaller cities and at regional airports. These hotels typically see high demand and thus can command rate premiums, even if guests have to travel a little farther to reach them.
“Our airport hotels have the highest occupancy levels,” said LaBarre, who noted Crowne Plaza Hotels operates numerous airport properties but none physically located within a terminal. “Occupancy is 77% at (parent company InterContinental Hotels Group) airport properties relative to the rest of the franchised portfolio, which runs at 72%.”
That advantage doesn’t come merely through location, however. The traveler looking for an airport hotel often books a shorter length of stay and has unique wants and needs. Meeting these guest demands is essential, especially if the hotel is within a cluster of competing airport properties, sources said.
“It’s important to have large lobbies, huge restaurant facilities, shuttle services and swimming pools, on top of meeting facilities. These are key advantages you have to provide when operating airport hotels, especially in the upscale hotel segment,” said Denys Sappey, GM of distribution, Web, IT and revenue management for AccorHotels. “The average duration of stay is around 1.7 nights, which highlights the efficient service level you must provide in order to create a competitive advantage. Quality of service is a must.”
For those hotels that are in fact physically attached to the airport, the service game gets kicked up a notch higher. At the forthcoming Westin Denver International Airport, this will include express access to the terminal, even if the guest isn’t ready to board that day. In the future, a separate security checkpoint also will be made available.
“As a guest of the Westin, you will have the ability to go into all three terminals, even if it’s not your day of departure,” Curley said. “You can get a pass to go through security, so now you’ve got triple the amount of options for restaurants, shopping and other amenities the airport offers.”
There are more airport hotels on the way, too. Due to the strong operating fundamentals, rising levels of air travel (especially from international visitors) and overflow demand being pushed outward from city-center hotels, developers will continue to seek airport locations for new projects, Curley said.
“Since these hotels run up a pretty strong occupancy, I would think that would bode well for additional development,” he said. “Airport hotels will continue to get more interest based on the business levels they run.”