Mark Woodworth, president of Atlanta-based PKF Hospitality Research, says his firm figures a 3.9% decline in US hotel demand if airline capacity falls by 10%, due to cutbacks in capacity announced by major carriers. Such a reduction would translate to approximately 40 million fewer room nights, or $4.3 billion in lost revenue on an annualized basis, he says.
"To put this in perspective, the decline in lodging demand experienced in 2001 was just 3.3%," Woodworth said in releasing his firm's latest analytical data this week. "With losses like this, hotel operators would be forced to make drastic cutbacks in staffing and other operating costs."
PKF states that it has discovered a highly significant relationship between available seats on flights and hotel room-night demand, as had been intuitively believed within the hospitality industry. It bases its theory on historical data from Smith Travel Research, Moody's Economy.com and the US Department of Transportation, while also factoring in changes in income and employment.
Miami, Orlando, Phoenix and Denver stand to take the biggest hits from a falloff in hotel demand related to air travel, according to Jack Corgel, a real estate professor at the Cornell University School of Hotel Administration and senior advisor to PKF's research affiliate. "What these markets have in common is that they are either major leisure destinations, or geographically situated in an isolated location away from other major metropolitan areas," Corgel stated as part of the analysis.
However, others tracking the lodging industry contend that travelers may be inclined to stay longer on business trips, with some hoteliers benefiting from those extra room nights. "Airline reductions have lacked discipline historically, but likely will be more disciplined this time given greater challenges," says David Loeb, managing director of hotel real estate with Robert W. Baird & Co. in Milwaukee, WI.
PKF admits that the decline might be averted by the fact that airlines are cutting out flights having the least demand and lowest 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," Woodworth says. "Trips will still be made."
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