No-frills airlines are no guarantee for local hotels

Since they first appeared on the European aviation scene, "no-frills" airlines such as Ryanair and EasyJet have succeeded in re-writing the rulebook for air travel, writes Colm Ward.

One of those rules was that hotels located near an airport could not fail to succeed, thanks to the steady stream of travellers coming and going.

But a new report by business advisers KPMG has cast doubt on this assumption. The survey, which was carried out by the group's European travel, leisure and tourism team, examined the situation in several European airports served by the budget airlines. It concludes that, contrary to accepted wisdom, there may be no advantage to hotels being located near these air hubs.

"I think the message that is coming through from this is that the mere presence of a low-cost airline coming into an airport doesn't necessarily mean a hotel chain should locate there," says Ms Laura Gallagher, a KPMG partner specialising in the hotel and tourism sector.

One of the features of the sector is its reliance on secondary airports, which are often located at a distance from major cities. These airports are attractive to budget carriers because they offer landing facilities at considerably cheaper prices than the major airports.

In return, they are often heavily reliant on the business provided by budget carriers.

Lubeck airport in Germany is totally dependant on budget operations, while low-fares airlines account for 90 per cent of traffic at Charleroi and Luton airports.

But, because many are served by only one or two airlines, passenger numbers may not be sufficient to provide a steady business for a hotel. "It is unlikely that one airline will deliver enough volume to support a hotel," Ms Gallagher says.

The findings have implications for hotel developers in Ireland. As low-cost carriers expand their operations to regional centres, some developers might be tempted to build hotel facilities in the area. However, they should take into account the quantity and quality of amenities in the area, she says.

If a location does not already have a solid business base, the presence of a budget carrier is unlikely to significantly increase overnight visitor numbers.

The report found, however, that the presence of low-cost airlines can contribute indirectly to business for hotels and other hospitality businesses.

It cites the example of Charleroi airport near Brussels, where the development of a nearby business park provided the impetus for the building of a budget hotel.

The growth of the budget sector has led to a significant change in consumer booking patterns, with about 90 per cent of bookings now made directly over the internet.

According to the report, this presents an opportunity for budget hotels to cater for independent travellers with online booking facilities.

Rather than locating hotels close to secondary airports, the report suggests that it might be wiser to locate near railway stations, which offer a more dependable focus for development. Once built, they are unlikely to relocate.

In contrast, budget airlines are liable to pull out of regional airports should conditions change.

Passengers flying with low-cost airlines have increased from around 13 million in 1999 to almost 40 million in 2002, an increase of about 46 per cent a year and it is expected that the European budget airline sector will continue to grow by 20 to 30 per cent annually.

Even business travellers - the traditional market for full-service airlines - are moving over to budget carriers. A recent survey in Germany showed that 86 per cent of the top 250 companies have used low-cost airlines and that at least one passenger in 10 is a business traveller.