HENDERSONVILLE, Tennessee—Smith Travel Research classifies nearly 2,200 U.S. hotels representing about 301,000 rooms as “airport” locations. These hotels usually are within three miles of an airport and primarily serve demand generated by airport traffic.

Based on the 12 months ending September 2009, airport hotels generated more than US$6 billion in room revenue, about 6 percent of the U.S. total. More than 40 percent of airport hotel rooms are classified as upper-upscale or upscale, with another 18 percent falling into the midscale-without-food-and-beverage segment.

Airport properties normally are focused on business-related travel, including meetings, seminars, training and airline crews. Consequently, these hotels have taken a bigger hit than some other location types in the current cycle. Based on September 2009 year-to-date data, airport hotel occupancy and average daily rate declined 10.5 percent, pushing revenue per available room down 20 percent.

Only hotels designated as “urban” and “resort” in the STR database had bigger RevPAR declines (-20.5 percent for urban and -20.1 percent for resort). September year-to-date occupancy at airport hotels was 61.3 percent—significantly better than total U.S. occupancy of 56.6 percent—while ADR of US$91.33 was about US$7 lower than the U.S. average.

Airport hotel performance displayed different performance patterns in the previous two cycles. As would be expected, airport properties were severely impacted in the downturn of 2001-02. Twelve-month RevPAR was down 16 percent at the trough versus a total industry decline of 10.6 percent. Conversely, RevPAR was down 3.1 percent at the low point of the 1991-92 down cycle, about the same as the total U.S. industry decline.

In the current cycle, airport hotel RevPAR was down 17.6 percent, based on the latest 12-month September 2009 data, 1.4 percentage points lower than the total U.S. industry decline of -16.2 percent.

Federal Aviation Administration statistics for 2008 passenger enplanements indicate that five airports—Atlanta (Georgia) Hartsfield, Chicago (Illinois) O’Hare, Los Angeles (California) International, Dallas-Fort Worth (Texas) International and Denver (Colorado) International—accounted for just over one-fourth of all U.S. enplanements. September year-to-date performance at airport hotels in these markets was down across the board, but varied considerably.

Chicago hotels have been hit the hardest, by far. Occupancy declined 19.7 percent and ADR fell 17.6 percent, pushing RevPAR down a whopping 33.8 percent. During the same time period, the overall Chicago market RevPAR fell 25.9 percent.

On the flip side, airport hotels in Atlanta have fared better than the overall Atlanta market. Atlanta airport hotel RevPAR declined “only” 14.9 percent, while total Atlanta market RevPAR was off 19.3 percent.

At least part of this disparity can be attributed to the different mix of airport hotels in the Chicago and Atlanta markets. Just over 70 percent of airport hotel rooms in Chicago are upper-upscale or upscale hotels—properties that have been hit hard by room rate declines. In Atlanta, only 45 percent of airport properties are classified in the upper-upscale or upscale segments.

Many airlines have been reducing capacity in an effort to control cost, which could, potentially, negatively affect airport hotels. However, if airline load factors improve as a result of capacity reductions, the impact could be minimal or even positive. The most important factor in improved airport hotel performance is an improved economy, which, in turn, will boost corporate confidence and business travel. We would expect airport hotel performance to improve in the back half of 2010, similar to the overall hotel industry.