Hotel Development Builds Revenue and Destination Status

Feb. 16, 2017
Airports building attached hotels are enhancing the customer experience while building more revenues.

As airports continue to find ways to bring in non-aeronautical revenue and offer a better passenger experience, three facilities are using on-site hotels to do both.

Terry Teifer is the CFO for the Wayne County Airport Authority, which manages Detroit Metropolitan and Willow Run airports. As CFO, he oversees the Westin Detroit Metropolitan Airport, located in the McNamara Terminal. Opened in 2002, the hotel features 404 rooms, 10 suites, 26,000 square feet of meeting space and a pool and fitness center.

Detroit’s McNamara Terminal, home to Delta Air Lines, is by many accounts, one of the top airport hubs in North America, said Teifer. “If you look at what’s offered by modern hubs like Detroit, an airport hotel adds to our brand,” he said. “Our terminal is a single building with 122 gates that serves as the Asian gateway for Delta.”

Back when former Delta CEO Richard Anderson was in the same job at Northwest Airlines, he said he wanted a hotel at the airport, Teifer recalled. “He thought it would be a great fit.”

In the airport environment, the hotel is busy during the week, while weekends are slow, said Teifer. “You don’t get business that comes in just for the weekend, so business travelers are key. But we have a significant park and fly program where you can stay at the hotel and get up to eight days of valet parking,” he said. “We use that program to fill rooms on Friday and Saturday nights.”

Because Detroit Metro has flights to 130 destinations, travelers can fly in and use the hotel’s meeting space for events with no distractions, said Teifer. “We’re able to get multinational corporations to bring in team together for meetings. They can fly into the hotel, hold their meetings, then fly home,” he said.

Another unique feature at the airport is the hotel has its own Transportation Security Administration checkpoint, said Teifer. “The McNamara Terminal was designed before 9/11. But we have a solid concessions program that’s an additional amenity for guests, so TSA allows us to get them past security so they can shop and eat,” he said.

Reflecting the Region

Phil Brown is the executive director of the Greater Orlando Airport Authority, which runs Orlando International Airport. The airport hotel, a Hyatt Regency located above security, opened in 1992. It features 445 rooms (including 23 suites), 42,000 square feet of meeting space, a fitness center and an outdoor pool.

The hotel was the brainchild of former executive director John Wyckoff, said Brown. “He thought a hotel would provide a significant amenity for travelers in and out of the airport that also reflected the theme of central Florida,” he said. “There are some hotels that are connected to or near an airport, but I don’t know of many that are incorporated in the airport as part of its terminal.” Orlando is a great O&D destination, he added.

The airport has had the same operator, Hyatt, since the beginning, said Brown. “And we just negotiated a new 20-year deal with Hyatt.”

Like the Detroit Metro Westin, the Orlando Hyatt markets itself to travelers flying out of the airport. “You can check into our hotel the day before, check your bags and make your early morning flight,” he said. The airport also has a baggage retrieval and delivery service and its own airline check-in counters.

The hotel falls under the airport’s operations, said Brown. “We assume full responsibility for the management and refurbishment of the hotel,” he said. “So we have to balance the hotel’s needs with the airport’s needs, because the funds all come from the same source.”

Despite the recession that hurt a lot of hotels in the Central Florida region, the airport was able to survive, said Brown. “We’ve been able to cover our costs and pay for a refurbishment. In the early years, we had to subsidize the hotel, but those days are over,” he said.

The airport hired a hotel advisor that helps watch the bottom line, said Brown. “We’re good airport operators, but that doesn’t mean we excel at hotel operations,” he stated.

Stacey Nichols is the director of the hotel and transit center for Denver International Airport. The Westin Denver International Airport opened in November 2015. The hotel has 519 rooms, 35 suites, a pool and fitness center and a program that highlights environmental practices, including energy and water conservation and waste minimization.

“We’re excited to have this amenity here,” said Nichols. “It was originally part of our master plan to have a world-class hotel at the airport, so I’m happy to see it come to fruition.”

Teifer said his airport worked with Denver. “We helped them with lessons learned from our own hotel development.”

So few airports have connected hotels, said Nichols. “And so few offer this level of amenities that it been game changer here for Denver airport,” she said. “This facility is helping us meet the needs of today’s more sophisticated traveler.”

The unique challenge of running an airport hotel is operating in a fast-paced environment, said Nichols. “For example, I really appreciate the value of good weather forecasts from here and around the country, because we have unexpected passengers in need because of weather or airline issues. No day is the same,” she said. “Our team has to work together to take care of travelers during challenging times.”

Even though the Westin has only been open for about a year, it has become very popular for meetings, said Nichols. “Our location across from the terminal makes it easy for customers to plan fly-in, fly-out meetings,” she said. “Our meeting spaces have been in demand because of our great location in the center of the country. It’s been a success, and I’m happy to be part of their group and give them a great place to hold it.”

Building the Bottom Line

All three hotels are adding to the airports’ bottom lines. The Detroit Westin brings in gross revenues of between $30 million and $35 million, said Teifer. “The hotel helps offset the airlines’ costs here. Our Westin is number one in the southeast Michigan region for revenue per room,” he said. “There are other hotels across the street, but we get twice as much per room than they do.”

The airport will do a refurbishment on the hotel late this year, said Teifer. “It’s built very well. If you stay at a hotel across the street, you can hear the planes. Our hotel rooms are soundproofed, but you still get great views of the airport and air traffic.”

The budget for the Hyatt Regency Orlando International Airport is $42.2 million, and the operating budget is $39 million, said Brown. “For the past few years, we have surpassed what we’ve budgeted, but it requires a lot of management and balancing of the business. We’re in a very competitive environment,” he said. “At the end of the day, we have a major amenity that brings in travelers and groups to the airport from different communities to meet and have conferences. We have to have an occupancy rate to make a positive contribution to the bottom line.”

The Westin Denver International Airport hasn’t been open a year, but Nichols is pleased with its performance so far. “We expect to be profitable, bringing in $1-2 million in revenue by the end of the year,” she said.

All three agree that having a hotel attached to their facilities is an important part of their function and brand. “If you look at the McNamara Terminal, it’s clearly Delta’s brand, and Westin is also a part of that brand,” said Teifer. “It’s all about amenities. Delta is focused on business flyers. They go after that and Westin also fits into that.”

When people come Detroit Airport, they think it will be bad, said Teifer. “But they are really surprised when they get to our hotel, because there’s a real wow factor,” he said.

The Hyatt has become part of Orlando International’s brand, said Brown. “If you look at any photos of the airport, you see our iconic lobby fountain in many of those pictures,” he said.

When the airport hotel opened in 1992, it was only 11 years old, said Brown. “At that time, we were competing to attract business and leisure travelers. Miami International had a hotel in its terminal, but hotel we designed became iconic,” he said. “It gave us the ability to attract more visitors and airlines. Airline executives came and stayed at our hotel. It became something that make Orlando International unique in the airport world.”

Denver International Airport is in the center of the country, said Nichols.

“It’s an important hub that goes to 180 destinations. Passengers are looking for a four-star, full-service experience and they are getting it at the Westin,” she said. “The hotel also generates non-aeronautical revenue for airport, which is a win-win all the way.