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September 15, 2022

Airport Hotels Refine Revenue Management Strategies

Laura Koss-Feder, Hotel Now News, 15 Sept 2022

Located near DFW International Airport, the Hotel Vin, Autograph Collection by Marriott, tries to anticipate travelers’ needs as more flights have been canceled or delayed. (Hotel Vin)

Air travel delays and cancellations have become an unwanted phenomenon these days, fueled by labor shortages and rising fuel prices. Airport hotels have been particularly affected, as they sometimes need to house an unexpected flurry of last-minute stranded guests.

As these disruptions continue into the last vestiges of summer, airport properties are adjusting their revenue management accordingly to accommodate higher-demand periods. They need to use all the data available to them to best adjust room rates.

“Hotels in airport areas and nearby submarkets are working aggressively to partner with airlines and to also create awareness in order to attract distressed passengers, airline crews and other employees who work in airport operations,” said Tim Dick, executive vice president of hotel advisory and asset management at CBRE Hotels.

These properties are closely monitoring flight cancellations and weather patterns that may affect air travel. They are revenue-managing around these issues by comparing business from last year, reservations on the books for the days affected, and history of past events and pickup at the hotel, Dick said.

The use of technology to stay informed of pending changes in air travel, airline scheduling and cancellations is the best way to revenue-manage for these properties, he added.

They also need to develop agreements and arrangements with airlines for walk-in business, and try to offer travel arrangements to passengers and crews when other modes of transportation are at capacity, Dick said. Airport hotels need to carefully assess and reevaluate “on-the-books” confirmed reservations, and then open all distribution channels to the appropriate levels of availability in order to fill during these demand periods.

The industry is moving toward dynamic revenue-management software that calculates rates based on multiple factors, including seasonality, demand at the airport, weekdays vs. weekends, local events and much more. This real-time system allows the software to increase prices as inventory decreases and the potential for higher demand increases, said Jeff Holzmann, chief operating officer at RREAF Holdings. A good example of this would be a major weather event moving through the airport causing multiple cancellations.

Alex Cisneros, senior vice president of revenue generation at Red Roof, said the most up-to-date data is critical for hotel pricing strategies.

“Real-time information on flight cancellations is very important to make pricing decisions, so revenue managers use multiple flight-status sites and local market conditions to monitor delays and adjust strategies for airport hotels,” Cisneros said. “Due to the last-minute demand opportunities, we started to leverage some of our internal analytics and developed an unsupervised anomaly detection model to find the hotels experiencing last-minute demand so we can deliver [texts] or an email to the revenue manager [or] hotel owner to alert them.”

Air travel delays and cancellations provide hotels with opportunities for creative revenue-management strategies and can also positively affect ADR, Cisneros said.

“There is not a ‘one-size-fits-all’ approach, however, and market dynamics play a significant role in the process,” he said. “It stands to reason that larger airports, such as Dallas and Atlanta, experience more delays, leading to more competition for hotel guestrooms.”

Smaller markets also are being affected by significant delays, such as Albany, New York; Indianapolis, Indiana; and Jacksonville, Florida. These are markets that also have more opportunities to house stranded and delayed guests, he said.

Red Roof has tools and analytics that enable the brand to track airline delays and correlate where demand is increasing as a result. This allows the hotels to shift rates in real time accordingly, Cisneros said.

“Airport hotels need to have a last-minute strategy that leverages data, segment and channels effectively. Access to real-time information is critical and enables us to be more creative in analyzing traffic flow, track specific airport market data and assimilate all of that information into one place quickly,” Cisneros said.

Tom Santora, managing director of Hotel Vin, Autograph Collection by Marriott, located in Grapevine, Texas, near DFW International Airport, said his property doesn’t change rates based on “mass cancellation events such as weather.”

“In today’s labor shortage, a lot of hotels are not able to keep up with the demand of turning rooms daily, but Hotel Vin has been fortunate enough to ensure that all rooms can be sold to anticipate any last-minute demand,” he said.

The hotel works to keep a fair market rate, Santora said, and stay aligned for all guests — including those who booked in advance. The property also anticipate needs by building relationships with DFW Airport and staying proactive. The hotel also has adjusted service for unexpected delays. For example, it has implemented inclement weather procedures to provide meals for after-hours arrivals.