Hotels near airports across the U.S. have experienced a bump in business in recent weeks due to mass flight cancellations, particularly by Southwest Airlines — requiring hoteliers to quickly mobilize to take care of a rush of distressed guests.
A wave of flight cancellations began Dec. 22, peaking on Dec. 27 and lingering into the new year. Southwest officials cited challenges including overloaded internal scheduling platforms that are responsible for getting crews matched with flights, CNBC reports.
More disruptions occurred this week as a Federal Aviation Administration system failure grounded all flights across the U.S. in the early morning hours of Wednesday. The problem reportedly occurred with a system designed to "send real-time safety alerts to pilots," the New York Times reports.
John Beck, general manager of Crowne Plaza HY36 in New York, told Hotel News Now that the impact of flight cancellations on hotel demand is generally a "wash."
"If someone's coming into or planning [to stay at the hotel] and their flight gets canceled, someone [else is] stuck in New York,” he said. “Generally they wash and they don't really affect business unless … someone's system is down and the whole airline can't fly.”
The Southwest Airlines fiasco qualifies as an extreme case, with more than 15,000 flights canceled in total. But even in this case, U.S. hotel industry performance as a whole did not suffer.
Isaac Collazo, vice president of analytics at STR, wrote for Hotel News Now that hotel demand and rates were the highest ever for the week between the Christmas and New Year's holidays, when most of the flight cancellations occurred.
Hotel bookings canceled last minute as a result of flight disruptions were made up for by airport hotels, according to STR, CoStar's hospitality analytics firm, which studied the 10 largest hotel submarkets with a significant Southwest Airlines presence.
In these markets, airport hotels achieved 64.9% occupancy for Dec. 26-29. That was the highest on record for that four-day period, Collazo writes.
"More than 31% of hotels in those submarkets had occupancy above 80% during that period. Denver Airport/East achieved a collective occupancy of 75.1%, which was the highest occupancy that group has ever recorded for those four days. BWI Airport hotels reported record occupancy of 52.8%. Airport hotel occupancy in Phoenix and Nashville was also elevated during that period to 70.9% and 60.1%, respectively, the highest for that four-day period of the past three years," Collazo writes.
How Hoteliers Responded to Increased Bookings
In addition to the Southwest flight cancellations, severe weather in San Francisco drove last-minute bookings at the Westin San Francisco Airport Hotel and Aloft San Francisco Airport, according to Robert Brand, the general manager for the complex.
"The Westin and Aloft complex saw a very large amount of same-day reservations as a result over several days," he said via email. "There were a few days that the complex saw over 200 same-day reservations."
Brand said this was one of the busiest periods of last-minute bookings he's experienced heading into the new year.
"The weather and Southwest cancellations drove us to peak performance. Not only in occupancy, but also the food-and-beverage team had incredible days and nights as well," he said.
Though the pickup in business was favorable, it was challenging for the hotel teams to take care of the rush of guests that seemed "to come in all at once," Brand said, adding that positive feedback from guests during those peak nights was proof the staff handled it well.
Continued staffing shortages at both hotels have forced employees to be nimble, he added.
"These two hotels are consistently the market leaders in the area and have been able to keep our staff fully employed with quite a bit of volunteered overtimes, whereas other hotels and nearby markets have not been so busy," he said. "[With the hotels] consistently running over 90% occupancy, the teams prepare for sellouts nearly every day. Our morning strategy meetings are centered around getting every guest room cleaned that day, every day. This is one of the best teams I have ever worked with, and their daily rhythm sets the complex up for success every single day."
Brand said front-line staff members at both hotels were sensitive to what guests were experiencing at the airports. The teams prioritized expedited shuttle service and quick and friendly check-ins.
In addition to caring for guests, the goal was also to capture as much business as possible, he said, and the revenue team "was able to increase rate appropriately at the same time to drive overall revenue."
Kevin Patel, director of revenue management at Everwood Hospitality Partners, said bookings at the Holiday Inn Orlando International Airport also got a boost from the flight cancellations.
The hotel's staff took care of guests by handing out complimentary "distressed passenger kits," which included bottled water, a comb, toothbrush and toothpaste. The food-and-beverage team also extended its hours of operations to handle the additional flow of guests. Implementing a to-go menu was part of the strategy, too. Supplemental housekeeping and front-desk staff were brought in to assist with the demand, he said.
Patel said the revenue management team was able to lift retail rates with the last-minute increase from distressed passengers, "while still accommodating any contracted rates with our distressed passenger providers."
STR data shows 10 of the top 25 U.S. markets achieved all-time records for weekly average daily rate. On New Year's Eve, the Orlando market recorded $200 ADR.
With the higher rates for last-minute bookings, hotel sales teams closed out lower-rated distribution channels such as opaque pricing, which enable them to sell at hidden, lower prices. Patel said historically opaque rates are a strong hotel demand generator in airport markets.
Global third-party hotel management company Aimbridge Hospitality is a long-standing partner of Southwest, and worked quickly to support their needs.
Alyssa Comunale, Aimbridge's corporate director of national sales, said many of the company's airport hotels have distressed passenger agreements in place, but what happened with Southwest is not typical.
"The hotels offering mobile check-in and mobile key options were better-equipped to navigate the increased demand, particularly with regard to current staffing levels," she said.
Distressed passenger agreements with airlines typically set hotel rates that the hotel must abide by, Comunale said.
She added the pandemic better prepared hotels to operate in times of crisis with decreased staff and resources, but those that invest in tech now will be ready for the next disruption.
"Hotels were able to manage operationally by pulling from all departments of the hotel to ensure rooms were ready and the check-in process ran smoothly," she said.