Airport Hotels Are Taking Off

Hotel companies are developing more attractive—and profitable—airport properties to cater to the business traveler

by Christina Valhouli

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For a long time, airport hotels were considered a necessary evil. Most travelers wouldn't choose to stay at one unless they had an early-morning connection, missed their flight, or their company was too cheap to pay for a pricier downtown hotel. And, because these hotels were regarded as purely functional, second-choice options by both travelers and hotel companies, there wasn't much incentive to make them more enticing.

Until now. Hotel companies are beginning to wake up to the fact that airport hotels represent a new, potentially significant source of profits. Why? First, as the economy contracts, business will need to continue containing costs, and airport hotels typically have lower rates. Second, after the building boom of the past few years, competition among hotels in downtown areas will remain intense but the price of building more hotels is prohibitive. Finally, airport hotels really are more convenient. If it becomes harder for travelers to come to downtown hotels, it only makes sense for hotels to come to travelers.

As Janis Cannon, vice-president for brand management at InterContinental Hotels Group's (IHG) flagship InterContinental chain, says: "As a brand, we are always positioning our hotels where our customers are."

Downtown Appeal

These new hotels offer the same kind of aesthetics and amenities—such as complimentary Wi-Fi, fitness centers, and decent food—that travelers would find in upscale urban hotels, as well as such services as express check-in and grab-and-go food.

This summer, Starwood Hotels & Resorts Worldwide (HOT) is launching two new brands, Aloft and Element, aimed primarily at business travelers. Many of the new properties will be situated at airports and in secondary cities such as Green Bay, Wis., and Wilmington, Del. Instead of the bland breakfast buffets and decor prevalent in so many midrange hotels, Aloft and Element aim to deliver a more sophisticated ambience, with plenty of natural light and communal areas including cafés, lounges, and outdoor barbecues, as well as healthy fast food. Think of the brands as "W lite" (W is part of the Starwood portfolio). Look for Element to open in Chicago O'Hare in July, 2009, and Dulles North in 2009.

Randall Thayer, the executive vice-president of Portland (Ore.)-based hotel development company Pollin Hotels, is currently building an Aloft that is expected to open later this summer 1.5 miles from Portland International Airport. The hotel will be located at the new Cascade Station Center, a mixed-use commercial development featuring office, restaurant, and retail space. "The location is perfect, as it's right next to a group of office buildings and just a few minutes from the airport," he says.

Competitive Rates

Thayer says airport hotels usually have higher profit margins than nonairport properties, as they offer fewer services, need less staff, and have less overhead. "The hotel won't have a restaurant but we will offer grab-and-go food, as well as a bar," he says. The hotel is aimed at business travelers aged 21 to 35, "middle managers who are on a bit of a restrictive budget." The nightly rate will be $159, which Thayer says is between the prices for a room at a Hampton Court and at an Embassy Suites.

The $159 rate is higher than the national average for an airport hotel—but arguably, the average airport hotel won't have a pool table in the lobby or a funky, loft-like decor. According to Henderson (Tenn.)-based Smith Travel Research, the 2007 average daily rate for an airport hotel was $99.67 (up from $93.76 in 2006). The field is also looking very competitive. The Washington (D.C.)-based American Hotel & Lodging Assn. says as of 2006, there were 1,957 airport properties in the U.S. with a total of 275,123 rooms.

Minutes Away

One hotel company looking to deliver a luxurious and business-friendly airport hotel is InterContinental, which will open a property in October near Chicago O'Hare. The InterContinental Chicago O'Hare will be located in the suburb of Rosemont, Ill., just minutes from the airport, and will feature 555 guest rooms and 70 suites, with a starting rate of $249.

IHG's Cannon says Rosemont is an ideal location for the hotel: "The airport is two minutes away, and the city has 15 million square feet of office space," she says. The new hotel will have a business center that doubles as a flight center, where guests can check into their flights and keep an eye on boarding times, as well as a gym and an in-house performing arts complex.

Until the InterContinental, Aloft, and Element hotels open later this summer, there are still plenty of airport hotels to choose from that deliver good design, good food on the go, and all the latest tech amenities.

Check out the BusinessWeek.com slide show for a roundup of the best airport hotels.

Christina Valhouli is the London-based editor of iTraveliShop.com. Her work has appeared in Forbes.com, The New York Times, TheStreet.com, and Fodor's.