Room Rates of U.S. Airport Hotels: Examining the Dual Effects of Proximities

Abstract

Location-based premiums for hotels have been observed in various segments, such as downtown and resort hotels. However, the location effect of airport hotels has not yet been studied, despite the longstanding history and significance of this market, which is arguably the most location-sensitive segment. It has also been found that former models for hotel location based on firms’ bid-rent functions were not directly applicable to airport hotels, even when the monocentricity assumption holds. Thus, the current study applied the household bid-rent function to provide a theoretical justification for premiums on airport proximity and estimated their effects on room rates using the hedonic pricing method. Results indicated that location premiums for airport hotels are simultaneously affected by their proximity to the central business district as well as the airport. Implications for the hotel industry and suggestions for future research are discussed.