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Airport hotels take off

​​​Airport hotels taking off—but not fast enough

As air travel booms, hotel stock near travel hubs struggles to keep up with demand.

airplanes on a runway at sunset (image)

Even as developers and hotel operators rush a new breed of airport lodging to market, they remain well behind the crush of travelers, new JLL research shows. And as air travel continues to boom, the hotel industry is working on overtime to bring its capacity in line.

Only 15 out of the country's 35 busiest airports feature an on-premises hotel, with another five or so major airports having one in the development stages. This leaves nearly half of the country's major airports without an on-campus hotel which can be used to elevate an airport's profile with travelers and earn revenues such as ground rent revenue.

On average there are 24 hotel rooms in airport submarkets for every 100,000 airline passengers, according to JLL's research. Several prominent airports fall under that mark including San Diego's International airport, New York's LaGuardia Airport, Salt Lake City International Airport and Charlotte Douglas International Airport. These markets potentially represent opportunities for hotel development. John F. Kennedy International Airport only recently revealed preliminary plans to renovate the former TWA terminal into a hotel. It currently sits at only nine rooms for every 100,000 passengers.

Airport market hotel supply for busiest airports in United States

Airport nameIATA codeHotel rooms per 100K passengers enplanedCurrent hotel on airport land
Major airports average24
Orlando International AirportMCO24Yes
Fort Lauderdale–Hollywood International AirportFLL23No
Philadelphia International AirportPHL23Yes
Seattle–Tacoma International AirportSEA22No
Ronald Reagan Washington National AirportDCA20No
Oakland International AirportOAK20No
Phoenix Sky Harbor International AirportPHX19No
Salt Lake City International AirportSLC19No
Detroit Metropolitan Wayne County AirportDTW19Yes
Hartsfield–Jackson Atlanta International AirportATL17Yes
Logan International AirportBOS16Yes
George Bush Intercontinental AirportIAH15Yes
Denver International AirportDEN14Planned
Midway International AirportMDW12No
LaGuardia AirportLGA10No
San Diego International AirportSAN10No
Charlotte Douglas International AirportCLT9No
John F. Kennedy International AirportJFK9Planned
Honolulu International AirportHNL5No
Note: Pertains to the top 40 U.S. airports based on full-year 2013 passenger enplanements. Las Vegas McCarran International Airport is excluded from analysis given the thousands of hotel rooms located within 1+ mile on Las Vegas Strip. Hotel set room counts pertain to airport-positioned properties in upper midscale and above categories

With supply and demand out of sync, it’s not surprising that airport hotels posted nearly 10 percent growth in revenue per available room (RevPAR) in 2014, exceeding the national average by more than two percentage points, according to Smith Travel Research (STR). According to STR, airport hotels are posting the strongest gains in occupancy rates, average daily rates (ADR) and RevPAR in the industry, topping resorts and other hotels located in urban, suburban, interstate and small town areas. And JLL research further shows that hotels connected to passenger terminals or on-premises boast occupancy premiums up to 110 percent higher, and ADR premiums of 130 percent higher than their off-property counterparts.

Equally unsurprising, given those eye-popping fundamentals, developers and investors are pouring in. Denver’s airport will soon see the opening of a 519-room Westin Hotel, while the Minneapolis-St. Paul airport is actively seeking bids to attract hotel development. In 2014, U.S. airport hotels accounted for nearly $1 billion in single-asset trades; the Los Angeles Airport Marriott sold for approximately $160 million, the InterContinental O’Hare for approximately $120 million, the Holiday Inn & Suites Rosemont near Chicago’s O’Hare Airport for $35.5 million and the Clarion LaGuardia Airport for $18 million.

“Few factors will deter consumers from flying, making airport hubs stable demand generators,” say Adam McGaughy, Managing Director at JLL. “This is driving investors who are seeking solid performing assets to pursue airport hotel opportunities.”

REITs and private equity funds are leading the way in acquisitions, so far. However, following several years of steady growth in profits, these assets are now flying high and increasingly attracting the attention of hotel owners and operators as well.

With airports relentlessly expanding and making other capital improvements, and with the domestic economy humming, the number of air travelers is only going to increase—likely making airport hotels a solid investment for years to come.