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Crowded Airports Could Damage Hotel Industry Financial Potential

U.S. airports are getting more crowded which will cause people to stay home. Here’s the shocking news of just how it may affect the hotel business.

Tuesday, December 03, 2013
Glenn Haussman
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The hotel industry may be in great shape, but to ensure it stays that way people must actually get to their destination quickly, easily and hassle free. So while it doesn’t come up in conversation too much on the convention circuit, the airline business is inextricably linked to the lodging business. It’s critical to pay attention to not just what is happening in the skies, but also on the ground regarding how people leave the airport and travel to hotels once back on terra firma.

Of course the airline industry is more flexible regarding capacity than the hotel industry since it’s relatively easy to take planes out the system and essentially impossible and impractical to take hotels out of the equation. Though after the terrorist attacks in 2001 many hotel shuttered entire floors or wings of hotels for a bit. That’s the exception of course and will never be a rule.

And since no one wants that to happen again, folks in the hospitality world need to be cognizant of infrastructure deficiencies and the critical role it has to the health of the hospitality industry.

Here in the United States many of our airports are horrid. According to the World Airport Awards, there are only three U.S. airports in the top 50 and Denver International, the country’s first entrant, doesn’t appear to number 36! Worse yet Frommers cites four of the world’s top 10 worst airport terminals are in the U.S. Ouch!

A new study dubbed "Thanksgiving in the Skies" from the U.S. Travel Association and the Eno Center for Transportation proves that unless this country gets it act together in the skies and on the ground, the entire hospitality industry will experience deleterious effects.

"Travel has been one of the leading sectors of the economic recovery, but that success won't be sustainable unless our infrastructure keeps pace," said U.S. Travel President and CEO Roger Dow. "Every projection holds that the demand for travel will continue to dramatically rise, which portends terrific things for the growth of jobs and tax revenues. But that rising demand will be stifled without a significant effort to modernize infrastructure, and unfortunately the moment of greatest need has already arrived."

"Over the next decade, delays in our aviation system have the potential to inhibit travel and economic growth, and current federal policies are not structured to effectively address anticipated capacity issues," said Eno Center President and CEO Joshua Schank.

That is a serious problem when one in every eight jobs is in the hospitality industry, according to the AH&LA.

The study looked at the country’s top 30 airports, which alone account for 70 percent of all travel and the findings are shocking.

Incredibly the study revealed that 24 of the top 30 U.S. airports will experience passenger levels equal to the Wednesday before Thanksgiving (WBT) at least one day during the average week within five years. Additionally, one in five of major airports are already experiencing Thanksgiving-like congestion levels at least one day every week, including John F. Kennedy International in New York, McCarran International in Las Vegas, Orlando International and Chicago Midway International.

Looking farther out the study concluded 25 of the nation's top 30 airports will experience the same congestion as the Wednesday before Thanksgiving two days each week within a decade and within the next 15 years, every other day will feel like the Wednesday before Thanksgiving at more than half of America's largest airports.

That could mean an additional 19,000 arrival delays each year, or 329 arrival delays each day. This translates to a loss in the U.S. economy of more than $6 billion in travel spending by 2016 due to unmet demand at Newark and JFK Airports alone. That estimate could balloon to a $48 billion per-year loss by 2034.

The study suggests multiple policy changes to alleviate this issues including:
  • Restructure the federal Airport Improvement Program to target investment to the greatest national benefits.
  • Create a new federal discretionary grant program to address improvements and innovation in airport operations.
  • Explore the idea of separating the air traffic control and safety functions of the Federal Aviation Administration to accelerate the delivery of the NextGen air traffic control modernization program.
  • Relax the current federal restrictions on the airport Passenger Facility Charge to allow airports to raise additional revenues for investment.
  • Another study focusing on ground transportation form airports shows the power of rail transit. The study released by the American Public Transportation Association (APTA) and the U.S. Travel Association, hotels in cities with direct rail access from downtown to airport terminals receive nearly 11 percent more revenue per room than hotels in cities without a rail airport connection.
APTA President and CEO Michael Melaniphy said, “Clearly investment in local rail systems not only benefits residents, but drives significant economic growth in the travel and hospitality industries. For our nation’s great cities to be more competitive and command higher hotel room rates, we must seize the opportunity to invest in our local rail systems and interconnect these high-demand airports to our American cities’ world-class amenities.”

The study, A New Partnership: Rail Transit and Convention Growth, reveals higher revenue per room translates to a potential $313 million in revenue per year for “rail cities” – cities which have direct rail access to airport terminals. In the post-recession period, rail cities commanded 16 percent higher revenue per room than hotels in non-rail cities.

That is something that should make all major cities take notice.

“Our nation’s downtowns have lots to offer travelers, and rail connections allow travelers to have greater choice and flexibility in how they experience a region’s amenities,” said U.S. Travel Association President and CEO Roger Dow. “The availability of rail access to airport terminals can actually strengthen the attractiveness of destinations overall as well the performance of hotel properties near rail stations – particularly when it comes to welcoming meeting and convention attendees.”

According to the study, hotel properties located within ¼ mile of a rail station performed even better than those outside of that radius. These hotel properties averaged a nearly 50 percent higher (48.6 percent) daily room rate and a 12.5 percent higher occupancy rate.

“Rail cities” represented in the report include Atlanta, Chicago, Washington, D.C., Minneapolis, Portland, and San Francisco – all of which have major multimodal transportation infrastructure options for both residents and travelers. These six “rail cities” were compared to hotel performance in popular convention cities that lacked a direct rail connection to the airport terminal: Las Vegas, New Orleans, Orlando, and Sacramento and Tampa.
Credit
Glenn Haussman    Glenn Haussman
Editor in Chief
Hotel Interactive, Inc.

Bio: Glenn Haussman is Hotel Interactive's Editor In Chief, where he manages all editorial content for the hotel industry’s leading online information resource. Here he creates unique and in-depth content that stimulates and educates the publication’s ...
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