Airports throughout the world strive to provide the best level of service and facilities that enable them to stand out in an increasingly competitive environment. They are a ‘gateway’ and in many cases a major employer, offering influential infrastructure that ultimately benefits (and in some cases drives and sustains) long term local and national economic growth. The age of aviation has changed forever driven by the advent of low cost carriers and globalisation. The same can be said of airports that have evolved from merely being a port to a destination (as they now market themselves), and competition for attracting major carriers (and therefore the ability to serve more destinations) increases.

Airports are generally located outside city limits and as the growth in passenger numbers has increased so have the internal facilities (take Heathrow’s Terminal 5) and supporting infrastructure that not only includes offices, retail and car parking, but also crucially hotels.

What drives demand for airport hotels? Is this solely related to passenger numbers or are there other factors influencing this?

Airport hotels by their nature and target market are different from, say, city centre properties. The general consensus is that airport hotels are heavily reliant on demand generated by passengers staying overnight before or after flights; however, as we will set out in this article, these hotels also attract demand from other sources. The article looks to quantify the level of demand for hotel accommodation for onsite airport hotels. It also investigates the relationship between passenger numbers and accommodation demand at some of the UK’s largest airports.

UK airport performance

As previously alluded to, the use of airports has grown rapidly over recent years with restrictions on growth tempered mostly by government policy. This is particularly true of more established airports such as London’s Heathrow. The graphs below illustrate passenger numbers for a selection of major UK airports over the last 10 years. Stansted and London City have experienced the largest increase of the London airports, with passenger numbers doubling over the last 10 years. The smallest increase was experienced by Heathrow mainly due to this airport operating at nearly full capacity in recent years. However, a significant increase in passenger numbers is expected with the further development of Terminals Two, Three and Five.

Edinburgh Airport has witnessed the larger increase of the two Scottish airports under consideration, with passenger numbers increasing from 5m to almost 9m over this period.

In terms of the regional airports, Manchester has a significantly higher annual number of passengers than Birmingham and East Midlands, however this airport has experienced the smallest increase over the last 10 years. Passenger numbers increased by 153% at East Midlands Airport and by 38% over the corresponding period at Birmingham.

The demand for airport hotels

In order to quantify the number of annual bed nights airport hotels generate, we have calculated the average occupied hotel rooms per 1,000 passengers between the period 2003 and 2008.

Relationship between passenger numbers and demand for airport hotels (2003 to 2008)

Airport Occupied rooms per 1,000 passengers1 Standard Deviation
London Heathrow 24 3.15
London Gatwick 21 0.89
London Stansted 13 2.67
London Luton 13 2.66
London City 61 6.32
Manchester 24 1.82
Edinburgh 11 1.07
East Midlands 19 0.95
Birmingham 15 1.89
Aberdeen 74 5.58
1 Average annual occupied rooms per 1,000 passengers (2003 to 2008). Estimates of occupied rooms based on PKF occupancy statistics
Source: PKF Research

The number of occupied rooms range from 11 to 74 per 1,000 passengers, which therefore confirms that there is not a consistent level of hotel demand generated across these airports. This could be due to socio-demographic factors and propensity to stay at airport hotels; distance from the nearest town centre; the proportion of international flights; number of connecting flights; flight departure times; airlines; length of flight; journey time to the airport; pricing; differences in hotel supply etc, all which can vary between airports.

The majority of the airports generate between 11 and 24 bedrooms per 1,000 passengers, however the exceptions include Aberdeen and London City airports, which generate 74 and 61 bed nights respectively. These airports also have the largest standard deviation, suggesting that they have experienced the widest fluctuation in overnight stays per 1,000 passengers over this period.

Is there a relationship between passenger numbers and occupied rooms?

As one might suspect, airport hotels can be heavily reliant on business generated by the airport in terms of passengers staying overnight before or after flights. To investigate the extent of this relationship, we have looked at the correlation between growth in passenger numbers and occupied rooms. We have further delved into this analysis to highlight the correlation between the growth in international passenger numbers and occupied rooms, if any.

Correlation between passenger numbers and demand for airport hotels (2003 to 2008)

Airport Correlation between growth in total passenger numbers and occupied rooms Correlation between growth in international passenger numbers and occupied rooms
London Heathrow 0.81 0.78
London Gatwick 0.60 0.63
London Stansted 0.75 0.76
Manchester 0.09 0.08
London Luton 0.72 0.71
Birmingham 0.40 0.61
Edinburgh -0.48 -0.52
East Midlands 0.63 0.68
Aberdeen 0.80 0.61
London City 0.30 0.50
1 Average annual occupied rooms per 1,000 passengers (2003 to 2008). Estimates of occupied rooms based on PKF occupancy statistics
Source: PKF Research