RevPAR Penetration at Airport Terminal Hotels

130% RevPar penetration… very attainable with Airport Terminal Hotels! Why? Barriers to entry, limited number of airports, and convenience, all contribute to the uniqueness of the success of Airport Terminal Hotels.
Monique Rosszell

An airport terminal hotel is a lodging facility that is physically attached to an airport, either integrated into the terminal or connected via a walkway so guests can walk to the hotel from the airport without having to rent a car or use an airport shuttle. At present, four such properties exist in Canada, and most appear to significantly outperform their respective airport lodging markets.

A hotel attached to an airport is in a unique situation to capture demand. It is the first hotel that travellers might consider when they are stranded at an airport because of a flight cancellation or an overbooking, as it does not require additional travel by shuttle, bus, or rental car to stay there. Airport terminal hotels are often used as a hub for corporate meetings in which business people fly in from different locations. This reduces the costs and complications involved in trying to obtain transportation away from the airport, and the airport location has fewer distractions than a downtown property.

The following are the primary factors that contribute to the success of airport terminal hotels:

  • Airport terminal hotels occupy a convenient location for short, same-day business trips/meetings.
  • Airport terminal hotels are easily accessible from the airport, so there is no commute time, and they are insulated from bad weather.
  • Airport terminal hotels can easily accommodate distressed passengers and airline contract demand.
  • Airport terminal hotels have a unique ability to capture day-use rates from international travellers and short-haul airline crews.
  • An airport terminal hotel's food and beverage facilities can compete with the restaurants in the airport for demand emanating from non-hotel guests.

Our research shows that, in addition to the hotels near the airport, airport terminal hotels compete strongly with the downtown hotels within a given market.

To gain a general understanding of how airport terminal hotels operate in relation to their respective competitive markets, we analyzed the operating performance of 14 airport terminal hotels in the United States (10 properties) and Canada (four properties). Their combined performance was compared to an aggregate of their respective competitive sets to determine their aggregated penetration rates. The performance of the airport terminal hotels relative to their respective competitive sets was then analyzed to determine the occupancy, average rate, and RevPAR penetration levels typical of airport terminal hotels.

The following table presents Smith Travel Research's trend results for these airport terminal hotels.

14 Terminal Hotels 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Occupancy 77% 79% 80% 75% 75% 73% 75% 71% 78% 77% 78%
Change - - 0.9% (5.2)% (0.1)% (2.8)% 2.2% (4.5)% 9.2% (0.9)% 0.9%
Occupancy Penetration 102% 105% 108% 102% 103% 108% 112% 106% 110% 107% 107%
Average Rate $104 $113 $121 $127 $135 $122 $115 $115 $120 $134 $149
Change - - 6.3% 5.0% 6.6% (9.8)% (5.7)% (0.1)% 5.1% 11.1% 11.7%
Average Rate Penetration 113% 113% 115% 118% 120% 118% 114% 116% 117% 120% 122%
RevPAR $80 $89 $96 $96 $102 $89 $86 $82 $94 $104 $117
Change - - 7.2% (0.4)% 6.5% (12.3)% (3.6)% (4.7)% 14.7% 10.1% 12.7%
RevPAR Penetration 116% 119% 124% 120% 124% 124% 128% 124% 128% 129% 131%
Aggregate Airport Competitors 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Occupancy 75% 75% 74% 74% 73% 68% 67% 67% 71% 72% 73%
Change - 0.3% (1.8)% 0.3% (0.8)% (7.8)% (1.0)% 0.5% 5.9% 1.1% 0.9%
Average Rate $92 $100 $105 $108 $112 $106 $101 $98 $103 $111 $123
Change - 8.8% 4.9% 2.3% 4.1% (5.3)% (5.2)% (2.2)% 4.5% 7.9% 10.6%
RevPAR $69 $75 $78 $80 $82 $72 $67 $66 $73 $80 $89
Change - 9.2% 3.0% 2.6% 3.3% (12.7)% (6.2)% (1.8)% 10.7% 9.2% 11.6%
Source: Smith Travel Research

Airport terminal hotels strongly outperform the local airport markets in which they compete. As shown in the table, the airport terminal hotels posted occupancy penetration levels above 100% in each of the last 11 years; the occupancy penetration rate ranged from roundly 102% to 112%. The highest occupancy penetration levels were achieved in 1998, 2001, 2002, and 2004. The average rate penetration levels for the airport terminal hotels were even stronger; they ranged from roundly 113% to 122%. Average rate penetration peaked in 2000, moderated in 2001 and 2002, and gradually recovered until it surpassed all previous levels in 2006. As a consequence of these strong occupancy and average rate penetration levels, the RevPAR penetration level has slowly but steadily increased from roundly 116% in 1996 to 131% in 2006, and estimates for 2007 look even more promising.

Historically, airport terminal hotels have clearly demonstrated at least average operating performance in the worst of times and superior operating performance in healthier times. Interestingly, although airports (and thus airport hotel markets) suffered vastly in 2001 following the events of September 11th, the decline in the aggregated performance of the airport terminal hotels was comparable to that experienced by their respective competitive sets on a percentage basis for overall RevPAR, with declines in average rates being greater than declines in occupancy. As stricter airport security measures created lengthy airport delays during the passenger check-in process following September 11, many travellers discovered the unique benefits of staying at an airport terminal hotel; the added difficulties travellers began to experience unexpectedly benefitted airport terminal hotels. Even if their business takes them to a downtown area, travellers often bypass typical downtown accommodations in favour of the airport terminal hotel knowing that they could spend the night before their return flight at the airport, thereby assuring a timely airport check-in.

As high-pace lifestyles seem to increase the premium that travellers place on time, all segments of hotel demand are becoming less price-sensitive to the rate premium that airport terminal hotels command. In other words, travellers recognize the unique value of staying at airport terminal hotels and are willing to pay higher rates for the advantages they offer.

The physical barriers to entry support the high RevPAR penetration between airport terminal hotels and their competitive sets. Airport authorities usually authorize one terminal hotel per airport, or one per terminal in larger airports. Downward pressure on RevPAR growth is experienced in most markets until the new supply has been absorbed. For airport terminal hotels, the barriers to entry and the advantages of their unique location strongly mitigate this impact.

So why don't we all go out and acquire airport terminal hotel properties? They are rarely sold and highly coveted. In Canada, there are three new airport terminal properties currently in the development pipeline, at the Montreal Airport, the Halifax Airport, and the Edmonton Airport. Allegedly, the bidding process has been very competitive. Perhaps we need to build more airports.

Monique Rosszell AACI, MRICS, is Senior Managing Partner of HVS Canada and leads the Toronto and Montreal HVS teams. Upon attaining a bachelor’s degree in economics from Queen’s University, she subsequently enrolled in the Master’s program in Hotel and Restaurant Management at the Ecole Hôtelière de Lausanne, Switzerland and then attained both her AACI and her MRICS appraisal designations in Canada. Monique has been working in the hotel industry for over 30 years and has completed hundreds of valuations and feasibility studies, including transaction and portfolio valuations throughout Canada and the USA. She is fluent in French and therefore has a strong presence in the Province of Quebec and New Brunswick. She also offers litigation and expert witness support in partnership disputes, hotel expropriation, insurance claims, and general hotel industry norms. She speaks at numerous conferences and is the trusted go-to hotel industry investment advisor within the lodging industry in Central and Eastern Canada. Contact information for Monique Rosszell: Phone (416) 686-2260 ext 23 Email: [email protected]


  1. Andrew JohnstonJanuary 19, 2010

    I was wondering if the data in this study has been updated. Any help would be greatly appreciated. Thanks, Andrew Johnston

    • Andrew, I am sorry but not having worked on a more recent airport terminal project, I have not updated the data. If you wish to purchase the data from STR (which is where I purchased it) ...that might be an option for you.

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