No-frills airports "too risky" for new hotels

14 March 2003 by
No-frills airports "too risky" for new hotels

The growth in budget airlines across Europe is bringing new business to hotels, but the volatility of the low-cost airline market makes many of their destinations too risky for hotel investment, says a new report from consultants KPMG.

The report, unveiled at the International Hotel Investment Forum in Berlin yesterday, highlights the 46%-a-year increase in passengers flying with low-cost carriers since 1999 to almost 40 million in 2002. And the sector is expected for grow by a further 20-30% a year.

But the ability of low-cost airlines to change routes almost immediately - as seen with Ryanair's recent decision to close 12 routes operated by Buzz - means that it is often too risky to build new hotels at the airports they use.

"Hoteliers can't be too hasty in their investment choice," the report says. "Investors and developers should look to markets that can provide a sustainable local market demand without being reliant on the incremental demand generated by low-cost carriers using the local airport."

Budget hotels at larger regional airports such as Stansted and Luton in the UK are benefitting substantially from increased overnight stays, says the report. This is largely thanks to the early departure times of many budget flights.

But this demand for hotel rooms is largely restricted to outbound passengers. "We have found little evidence that increased traffic is stimulating new hotel developments in the surrounding areas of other secondary airports elsewhere in Europe," says the report.

Budget airlines have, however, increased the demand for independent holidays and weekend city breaks. They have also increased low-season demand in tourist destinations such as Ibiza, Alicante and Pisa.

And they have got customers used to booking via the internet.

"The budget hotels, in particular, are presented with new opportunities for targeting the traveller than wants to create his or her own holiday package," says KPMG. "Online booking platforms could, potentially, be the next step in the collaboration between budget airlines and hotels."

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