Why Some Airports Are Getting Posh Hotels
Scan the lodging options around most big U.S. airports, and you’ll find an abundance of humble accommodations—along with a few best described as frightening. The tony hotels are typically found in city centers, where business travelers, tourists, and conventioneers tend to congregate.
The post-recession U.S. hotel boom is changing that, with upscale airport hotels now planned in Minneapolis-St. Paul, New York City, Atlanta, and a 500-room Westin opening Nov. 19 at Denver International Airport.
Given the generally higher costs for a full-service hotel such as a W or Hilton, these projects haven't traditionally mixed with airport traffic that comes and leaves quickly, often because of weather-marred flights. But two travel trends are converging to change that math. Commercial real estate developers are seeing airports as fertile locations, driven by rising demand for rooms and conference space. And U.S. airports are upgrading their facilities to appeal to a more sophisticated clientele, the kind who want such amenities as spas, trendy bistros, and even yoga spaces.
“Passengers in general have increased their expectations of airports,” said Kim Day, chief executive officer of Denver International. “They want higher-end shopping, better food, and they want better places to stay when they stay.”
That also means a stroll to the hotel lobby from the terminal—no shuttles—along with cutting-edge design, full-service spas, chic bars, and upscale restaurants. This new breed of airport hotel also affords ample space for business meetings, given that many companies like the idea of flying employees to a central point near (or in) an airport and getting down to business without the hassles of transit. And with occupancy rates near record levels for most full-service hotels, it’s harder for a business group to find room at the inn, which changes the economics of putting a full-service property at or near an airport.
Room demand at airport locations has grown from an average of 55 million room nights in 2010 to 65 million today, according to STR, a lodging data and research firm. Average room rates at airport locations have also increased, in line with the overall industry, and now top $110 per night. “The occupancies are so high now some players are saying wait a second, maybe this [airport] is a place we should look,” said Jan Freitag, an STR senior vice president.
The Denver hotel, which has endured a history of fits and starts since the airport’s 1995 opening, is designed as a destination for business travelers to meet and a way to bridge the airport with central Denver, which sits nearly 30 miles to the west. In April, a new light rail train will connect the Westin and airport with downtown via a $9 ride that's 37 minutes. Day predicts that line will help make the hotel a destination for weddings and other events.
This summer, officials at Hartsfield-Jackson Atlanta International sought bidders for a 300-room, “top-tier” four-star hotel to be built as part of a “travel plaza” that would have office space, a gas station, and possibly residential units. Atlanta vies with Chicago's O'Hare as the world's busiest airport hub but has no hotel connected to a terminal, as airports such as those at Detroit, Tampa, and Huntsville, Ala., offer.
“In the 1960s and ’70s, airport hotels were for distressed passengers” grounded by bad weather or a broken airplane, said Tyler Morse, chief executive of MCR Development, which is building a 505-room hotel in the former TWA Flight Center at JFK International Airport. JetBlue Airways is a minority owner of the project, which will be connected to the airline’s Terminal 5. The hotel is planned to open in the third quarter of 2018. “They thought ‘I should have this as a backstop. Let’s do the bare-minimum kind of thing,’” Morse said. “And now people are saying, ‘Hey, I can make money by having a higher-quality product.”
Stephen Joyce, chief executive of Choice Hotels International, said the deep airline capacity cuts of the 2000s led airports to retrench as business travel waned. Hotel developers then looked elsewhere, and much of the airport lodging stock aged. Today, the airport market is “becoming more interesting,” Joyce said in a recent interview. “I bet we've got 10-12 projects in and around airports” that are under various stages of development.
In Minneapolis-St. Paul, Graves Hospitality is planning a $115 million hotel with a spa, rooftop suites, and as much as 40,000 square feet of meeting space. The 300-room property, attached to the airport’s primary Terminal 1, will command rates that are 15 percent to 30 percent higher than local competing properties, at $225-$250 per night, said Benjamin Graves, president and chief executive.
“The primary business is corporations that are dealing with mid- to high-end travelers that fly in, go to a meeting; they don’t have to get a taxi, they don’t have to figure out the market and how to get different places,” Graves said. Graves Hospitality is negotiating with a trio of major chains—Starwood Hotels & Resorts, Hilton Worldwide Holdings, and InterContinental Hotel Group—about which will brand and operate the property, which is scheduled to open in January 2018.
Other than in Vancouver, Canada has a similar dearth of full-service accommodations at airports. The upscale Fairmont Hotel at Vancouver Airport has been something of an anomaly for both airports and the hotel industry since its 1999 opening. (The hotel says it is the only airport hotel in the world to make the Top 100 Gold List of properties compiled by Conde Nast.) Graves said the Fairmont’s success has caused developers to take notice.
“Go to any airport,, and there’s a zillion hotels within two miles,” Morse said. “To really do this right, you’ve got to be physically connected.” And at many airports, a day spa doesn't hurt either.