Though quality buying opportunities abound, analysts and hoteliers report some recent growth in corporate meetings demand for the cost efficiency of airport hotels.
For more than two years, the combination of a particular set of factors—beyond the economic and terror-related issues that have affected the entire lodging industry—limited the occupancy at and negotiating leverage of airport hotels: Low levels of air travelers deprived those properties of its most fertile opportunities for corporate meetings, heavily discounted room rates offered by downtown properties drew a larger share of the limited number of corporate meetings available and smaller citywide events enabled downtown properties to house more attendees, pushing fewer to the airport properties. The result was exceptional buying power for those corporate buyers interested in booking airport hotel space.
Yet, airlines in 2004 have reported higher passenger load factors, and downtown properties have focused on protecting their room rates
(Meetings Today, March 29). As the corporate meetings market takes tentative steps toward an honest recovery, airport hotels have more opportunity to tighten contracts.
"That business increased in the first quarter after an 18-month lull," said Deborah Lusby, senior sales manager at the Westin Los Angeles Airport hotel. "We've seen good meeting demand from the financial and pharmaceutical markets, and our average daily rate in February was the highest it's been in a long while."
The Hyatt Regency Houston Airport hotel also has experienced increased corporate meeting demand of late, much of it from Texas-based oil and gas and manufacturing companies, said director of sales Stacy Hunt, who noted that much of it is very short term.
Meeting attendees generally comprise about one-quarter of total airport hotel guests, said Kenneth Kuchman, San Francisco-based vice president of hospitality industry consulting firm PKF Consulting. Kuchman, citing figures provided by Smith Travel Research, said aggregate total occupancy levels at domestic airport hotels have dropped steadily from the 70.5 percent level posted in 1997 to a 61.8 percent figure in 2003, up slightly from a low of 61.5 percent in 2002. However, those properties' average daily rate has fluctuated significantly, reaching a high of $82.25 in 1998, and then vacillating before bottoming out last year at $76.02.
The overall hospitality industry slump forced airport properties to compete with downtown hotels for corporate meetings. Given that one of airport hotels' primary draws is their cost, heavily reduced downtown hotel costs have hurt the properties. "Some hotels in the center of markets are offering rooms at very competitive rates, and they will fill up first," Kuchman said. "Airport hotels are popular meeting sites, but they will not fill up if other alternatives are available."
Lusby said the Westin competes not only with properties in downtown Los Angeles and along the beaches of southern California, but also with airport properties in San Francisco and San Diego. Despite the fact that many of her hotel's meetings are marked by extremely short lead times—as little as one week—Lusby said planners typically will bid the meeting to several properties. "Planners are much smarter and savvier now, and they will look for the best rate and location and accessibility," she said. "We have to analyze what we have on the books and play the day-by-day rate game."
A fair number of the meetings at Hyatt's Houston airport hotel are booked through Hyatt's E-mmediate Meetings online event booking portal, Hunt said, but the use of that technology has not stopped meeting buyers from soliciting at least three bids for each event. "Ultimately, the deciding factor is going to be rate," Hunt said. "Buyers are concerned about food and beverage pricing and guest room rates. We definitely have to sell the value."
Given the Texas base of much of the property's corporate meetings business, Hunt must compete with other Houston-based properties. "We cannot get into a rate war with a downtown hotel," she said. "If buyers are looking for a quick, fly-in meeting, that's great for us."
Kuchman noted that airport properties typically rely on spillover business from large, citywide conventions that downtown hotels alone cannot handle. In the absence of such conventions, or associated spillover, airport properties lose a key revenue stream.
"Large conventions downtown push business to us, but 2004 is not a huge convention year for the city," Hunt said, "but we are always negotiable, and we're always willing to work."
Lusby's hotel, she said, still is not in a position to reject corporate meetings business on the hope that a more lucrative event can be booked for the same dates. As such, buyers still should be able to negotiate. "We've been able to negotiate and we'll make concessions, and so will the buyers," Lusby said. "Nine times out of 10, they'll want to talk about the meeting room rental fee first. Some are apt to pay higher room rates for complimentary rooms."
Kuchman said buyers have reason to expect more difficult negotiations in the coming years. "In the near term, that segment should be flat, but things should pick up in the longer term," he said. "In 2005 and 2006, we could see a return to late-90s levels, if not those of 2000."