STR counts approximately 2,300 hotels located in or near an airport throughout the United States. In 2015, these hotels had approximately 322,000 rooms available each night, with an available inventory of approximately 115 million room nights in one year.
Performance of airport hotels is healthy with an average occupancy of over 70 percent in each of the last three years. Occupancy has grown steadily since the 2010 recovery, but through November, year-to-date 2016 declined very slightly by 0.2 percent. That said, the absolute occupancy was still 74.5 percent, so airport hotels sold on average three of four rooms each night in the first 11 months of 2016, certainly a strong performance. In comparison, the total U.S. average occupancy was lower—just under 67 percent. High occupancies allowed airport hotel operators to increase ADRs at a healthy pace. In 2014, ADR increased 6 percent, followed by a 6.5 percent increase in 2015. Through November of 2016, ADR increased 3.6 percent. It will be interesting to note if continued high occupancies will give hoteliers confidence to increase their room rates in 2017 at a pace that is more in line with past performance.
Despite high occupancies, airport hotels have not been the darling of the development community. New room supply in airport markets has been muted and very few new rooms have been built over the last few years. The annual supply percent change between 2011 and 2015 was less than 0.6 percent each year and only through
November of 2016 picked up to 0.9 percent. At the same time, room demand grew at a healthy clip of 4.1 percent in 2014 and 2.2 percent in 2015. It is just a matter of time before developers look at airport hotels as an untapped opportunity given the lackluster supply growth numbers.
That said, some developers are already trying to tap into these locations. Currently, there are 185 hotels with the term “airport” in the name in the STR U.S. Pipeline. These hotels comprise a little less than 23,000 rooms, but some projects in earlier planning stages have no room count assigned as of yet. Of these, 58 hotels with 6,998 rooms are currently under construction, and 89 properties with approximately 11,000 rooms are in the final planning stage. So, despite some activity, the room additions are still relatively small and should not affect the national occupancy numbers.
When digging into the data a bit more, it becomes obvious that airport hotel occupancy is clearly delineated between weekends (Friday and Saturday evening) and weekdays. In 2015, weekend occupancy was reported at 75.7 percent, through November of 2016 it was even reported at 77.2 percent. Weekday occupancy in 2015, in contrast, was “only” 72.8 percent and 73.4 percent through November 2016. The purchase pattern seems that leisure travelers, in much larger numbers than business travelers, book an airport hotel prior to or right after their trip.
Airport hotels have done well in the last few years, and with business and leisure demand continuing their steady increase, these hotels are poised to perform well in the next few years.
About the Author
Jan Freitag is senior vice president of STR.