On Friday, hundreds of flights across the country were slashed due to the government shutdown. Travel disruptions followed, and hotels are likely to get stuck in the crossfire.  

The Federal Aviation Administration announced it would eliminate 4% of flights at 40 of the country’s largest airports, including in New York City, Los Angeles, Dallas and Chicago, and work up to 10% reductions, the Associated Press reported Thursday. As those cuts take effect, travelers brace for widespread flight cancellations and delays. 

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The disruptions are bad news for the nation’s hotels, as flight delays and cancellations “have a downstream effect on lodging,” Matt Carrier, senior vice president of federal government affairs at the American Hotel & Lodging Association, told Hotel Dive. Continued uncertainty, he said, will undoubtedly result in lost revenue for hotels and the communities they support.  

As the government shutdown carries on, with unprecedented flight cuts happening nationwide, Carrier and other hospitality pros shared with Hotel Dive how severely hotels could be impacted if travel turmoil continues. 

Flight delays impact hotel stays

The government shutdown has cost the U.S. economy $31 million per day in lost hotel business, according to AHLA. As of Friday, 38 days into the shutdown, that total cost was equivalent to approximately $1.18 billion. Significant air traffic reductions stand to exacerbate those losses. 

“When the FAA steps in to cut capacity, the impact is immediate for hotel owners — especially in major markets, airport corridors and convention destinations.”

Laura Lee Blake

President and CEO of the Asian American Hotel Owners Association

Hotel owner and broker Willie Singh told Hotel Dive he estimates that the flight cuts alone will cost hotels nationwide a total of $9 million in lost revenue per day at a 4% reduction rate and $22 million per day at a 10% rate. 

Laura Lee Blake, president and CEO for the Asian American Hotel Owners Association, similarly said that hotels could be looking at several million dollars per day in additional lost room revenue because of the FAA cuts. “The exact number varies by market and travel segment, but the revenue impact is real, and it compounds quickly,” she said. 

“When the FAA steps in to cut capacity, the impact is immediate for hotel owners — especially in major markets, airport corridors and convention destinations,” Blake added. “Fewer flights mean fewer arrivals and more uncertainty around bookings. And for many of our members, who are small business owners, that translates into fewer guests checking in and tougher nights trying to manage staffing and revenue.” 

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The main problem for hotels will be last-minute cancellations, Singh said. “Even if the reservation is cancelled on the same day, charging a guest a no-show charge will not be accepted, and hotels will see credit card disputes where the credit card companies will side with the customer,” he said. 

Additionally, the flight cuts will result in scheduling issues for labor-intensive departments like housekeeping, according to Singh.

Meanwhile, front-desk teams will “likely be spending more time helping frustrated travelers navigate rebookings,” Blake said. 

“Disrupted travel impacts everyone — guests, employees, and hotels,” Carrier said, echoing a similar sentiment. “Flight cancellations and delays will also result in cancelled hotel stays, rental car reservations, dinner reservations, and more.” 

On average, Carrier explained, for every $1 a guest spends on lodging, they spend another $2.34 during their trip. “If guests aren’t traveling and staying in hotels, state and local economies that rely on tourism will suffer,” he said. 

John Kelley III, senior vice president of Newmark Valuation & Advisory’s Hospitality, Gaming & Leisure practice, wrote on LinkedIn that the flight cuts’ effect on hotel room night demand “could be significant,” though the total impact will ultimately be dependent on how long the capacity reductions persist. 

“Urban, resort and convention markets — particularly those reliant on fly-in leisure and group travelers — would feel the greatest impact as booking windows shorten and cancellations rise,” Kelley wrote. Airport hotels would also experience notable declines in transient demand tied to reduced flight volume, according to Kelley. 

Drive-to leisure markets within a few hours of major cities, however, could see a modest rise in demand as travelers pivot to more accessible destinations, Kelley wrote. 

During a Thursday earnings call, Hyatt CEO Mark Hoplamazian said it would be “naive to think that [a] reduction in air travel won’t have an impact on travel,” but hotels’ ability to pivot will be “very important.” 

In times like these, there are drive-to markets that Hyatt will tap to offset lower demand, he said. “We learned this muscle and strengthened it tremendously during the early stages of COVID, so there will be … some mitigating factors.” 

Thanksgiving chaos looms

AHLA’s members have expressed that the shutdown is having a “dramatic impact on their businesses,” Carrier said. In particular, the association is “extremely concerned” about travel and hotel disruptions around the Thanksgiving holiday, he said. 

Singh shares that concern, saying that if the shutdown lasts through the Thanksgiving holiday, U.S. hotels will see “dramatically higher cancellations, re-bookings, stranded travelers and lost revenue” for the Wednesday through Saturday of Thanksgiving week — “one of the year’s busiest travel periods,” he said. 

At his own hotels, Singh projects to see 15% to 20% less revenue than last year for Thanksgiving week if the shutdown and flight cuts continue. “That is basically the profit that a hotel makes,” he said. 

Blake echoed that hotels could expect “significant lost revenue, potentially totaling tens of millions of dollars” if flight capacity is strained through Thanksgiving. However, “the bigger concern is traveler confidence,” she said. 

“If travelers are worried their plans might fall apart, they hesitate to book, and that hesitation lingers long after the shutdown ends,” Blake said. 

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Ahead of the FAA’s announcement to cut flights, 500 travel industry organizations and companies, including AHLA and the U.S. Travel Association, sent a letter to congressional leaders urging immediate action to reopen the government before the Thanksgiving travel rush. 

Blake said AAHOA is also actively advocating in Washington and standing with the broader industry to urge Congress to end the shutdown.