US hotels vulnerable to sharp declines in airline capacity

July 14, 2008 | Hospitality Industry

Hotels in the US could face a decline in lodging demand greater than that experienced during the turmoil following the terrorist attacks on September 11, 2001, according to the latest analytical data from PKF Hospitality Research.

Under a worst-case scenario, a 1% decline in the number of seats flown within the US will result in a 0.39% decline in the demand at the nation’s hotels.

Using historical data from Smith Travel Research, Moody’s Economy.com, and the Department of Transportation, and controlling for the effects of changes in income and employment, PKF-HR found what many intuitively believe: a highly significant relationship exists between available seats and hotel room night demand.

“Many industry participants have been speculating about the spillover effect a deteriorating airline industry will have on hotels,” said Mark Woodworth, President, PKF Hospitality Research.

“Our research measured the historical relationship between these two components of the travel industry. This allowed us to project just how much business hotels stand to lose given the cutbacks in capacity announced by the major airlines,” he said.

“If airline capacity is reduced by 10% as some have suggested, then lodging demand would fall off 3.9%. To put this in perspective, the decline in lodging demand experienced in 2001 was just 3.3%,” said Woodworth.

Given PKF-HR’s second quarter Hotel Horizons forecast for 2008, a 3.9% reduction in lodging demand for the year would translate into approximately 40 million fewer room nights occupied, or $4.3 billion in revenue, on an annual basis. “With losses like this, hotel operators would be forced to make drastic cutbacks in staffing and other operating costs,” Woodworth said.

Several factors, however, suggest that the decline might not be quite so bad. “As one would expect, the airlines are eliminating those flights that are in least demand and lowest in fuel efficiency. Some portion of the demand that would have booked a flight that is no longer available will simply adjust the timing of their travel plans. Trips will still be made,” he said.

Related Articles

Rate integrity in a down market
02 Jul, 2009 | Hospitality Industry

Marketing is storytelling
02 Jul, 2009 | Hospitality Industry

How to maximize your hotel’s GDS distribution
30 Jun, 2009 | Hospitality Industry

Aloft incorporates gaming into its Web experience
30 Jun, 2009 | Hospitality Industry

Asia: Rate parity - the elusive dream which just got more elusive
25 Jun, 2009 | Hospitality Industry

Carlson empowers employees to make revenue optimization decisions
25 Jun, 2009 | Hospitality Industry

How to ask better questions
25 Jun, 2009 | Hospitality Industry

Hotel technology moving into the cloud
24 Jun, 2009 | Hospitality Industry

New hotel review site launches with independent, expert reviews
24 Jun, 2009 | Hospitality Industry

Pegasus taps VFM Leonardo for ODD and Content Hub
24 Jun, 2009 | Hospitality Industry

Most Popular Articles

How to maximize your hotel’s GDS distribution
30 Jun, 2009 | Hospitality Industry

PKF sees hotel rates continuing to fall in 2010
17 Jun, 2009 | Hospitality Industry

If you discount, do so carefully
18 Jun, 2009 | Hospitality Industry

Summer travel trends according to hotels.com
23 Jun, 2009 | Online Travel

Luxury brands waking to a new reality
18 Jun, 2009 | Hospitality Industry

New hotel review site launches with independent, expert reviews
24 Jun, 2009 | Hospitality Industry

Destination marketing in the age of Web 2.0 and beyond
16 Jun, 2009 | Online Travel

Hotel technology moving into the cloud
24 Jun, 2009 | Hospitality Industry

“Thriving” not just “surviving” in a depressed economy: Tips for the independents
17 Jun, 2009 |

Information key feature for tourism social networking
25 Jun, 2009 | Online Travel

Economic Downturn

Rate integrity in a down market
02 Jul, 2009 | Hospitality Industry

The incredible shrinking airline
02 Jul, 2009 | Online Travel

U.S. spending on travel, tourism dropped 5.9% in first quarter
18 Jun, 2009 | Online Travel

If you discount, do so carefully
18 Jun, 2009 | Hospitality Industry

Luxury brands waking to a new reality
18 Jun, 2009 | Hospitality Industry

Travelocity says book now
17 Jun, 2009 | Online Travel

LHW courting guests discreetly with sweet deals
16 Jun, 2009 | Hospitality Industry

The new normal, according to McKinsey
11 Jun, 2009 | Internet Marketing

Pressure on hotel rates not likely to go away soon
04 Jun, 2009 | Hospitality Industry

Travelocity issues ‘Traveler Confidence’ report
03 Jun, 2009 | Online Travel

New study reveals changes in leisure travelers’ online search behavior
02 Jun, 2009 |

Marriott launches ‘Deal of the Day’, exclusively on Twitter
02 Jun, 2009 | Hospitality Industry

Expedia makes airline no-fee policy permanent, eliminates hotel cancel/change fees
28 May, 2009 | Online Travel

The new high-end consumer
28 May, 2009 | Internet Marketing

Hoteliers most concerned with marketing ROI
26 May, 2009 |

E-Mail Newsletter


Visit our sponsors: