London's airport hotels suffer with traffic falls
The declines in occupancy partly can be attributed to the increase in room supply in both markets. Gatwick saw the addition of 264 new rooms whilst the opening of Terminal 5 at Heathrow in March 2008 led to the creation of more than 1,294 new rooms, including 605 rooms at the Sofitel London Heathrow hotel.
There is no doubt that a significant portion of the decline in both ADR and occupancy is due to the general malaise of the world economy, as the downward trend for London’s hotels also indicates in the charts above. This is confirmed by the overall decline in traffic numbers as reported by BAA, which operate both airports. Figures for the year-to-31 May 2009 show Heathrow’s terminal passengers down 4 percent compared with last year, whilst those for Gatwick fell 10.3 percent in year-over-year comparisons. Air transport movements are down 2.5 percent for Heathrow and 8 percent for Gatwick.
The difference in the traffic figures between the two airports also illustrates the effect of the Open Skies agreement that came into effect March 2008. The agreement between the United States and the European Union was designed to increase competition within the transatlantic airline industry. The enabling of landing rights at Heathrow has encouraged airlines to either move their transatlantic routes from Gatwick or commence them from Heathrow. The cancellation by British Airways of its direct flights between Gatwick and JFK and the switching of five other routes (from Barcelona, Gibraltar, Madrid, Malaga and Pisa) to Heathrow with the start of its winter schedule on 25 October and the expected fall in hotel demand are indicative of the problems hotels in Gatwick will continue to face. Whatever the impact for airline passengers on the cost of transatlantic travel between London and the U.S., it appears that Gatwick’s hoteliers will experience the worst of it.
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