The Indianapolis Airport Authority has tapped Mansur Real Estate Services Inc. to develop a $50 million-plus Westin hotel
at the new midfield terminal. But the hotel's final design may be one submitted by a former competitor.
Indianapolis-based Mansur was one of three groups to offer proposals last fall. White Lodging Corp. of South Bend wanted to build a Marriott, and Indianapolis' KMI Realty Advisors Inc. pitched a Hilton for the site.
Project Director John J. Kish said White Lodging has dropped out of the running, and the Airport Authority is working out a deal with Mansur. Raleigh, N.C.-based Concord Hospitality Enterprises Co. would be part owner and manage the operations.
"We thought their ... financial plan was the most feasible," Kish said.
Kish and Mansur President Charles R. Cagann declined to disclose the financial details, saying the project budget and any Airport Authority contributions are still under discussion. But Cagann did say the project likely will cost more than $50 million.
"I think this would be a predominantly privately financed project," Cagann said. "What the discussion is about now is what condition the site will be delivered in. ... We've made a specific proposal. They may have plenty to say about that."
Hotel construction projects increasingly rely on public money to be viable, and one consultant thinks Mansur would need at least $10 million in assistance if the airport hotel comes in at $60 million.
With that level of aid, a four-star hotel connected to the terminal could succeed even though on-site lodging is unusual at a non-hub airport, said Rob Hunden, president of Chicago-based Hunden Strategic Partners Inc., a firm that consults on hotels and convention facilities.
Any project funding from the Airport Authority would come from its budget, composed of revenue from airport operations and some federal monies.
A subsidy totaling about 17 percent of the project cost would be slightly less than public incentives connected to other recent hotel projects. City officials awarded incentives equal to about 24 percent of the Conrad Indianapolis' construction costs, and a draft agreement for a new convention center hotel promises contributions equal to almost 20 percent of those expenses.
White Lodging is among the developers collaborating on the $250 million convention center hotel complex, and KMI--a corporation owned by veteran local developer Al Kite--built the $100 million Conrad.
While Mansur is poised to lock up the airport hotel deal, Airport Authority members actually preferred White Lodging's design proposal, which was developed by the Chicago office of St. Louis-based Hellmuth Obata & Kassabaum Inc. and locally based CSO Schenkel Shultz. The authority is negotiating with that group's architects to use its design.
Kish said White withdrew its airport hotel proposal after it won the city contract to build the 1,000-room convention hotel near Victory Field. Messages left with White officials were not returned.
Mansur proposed building a 250- to 300-room, four-star Westin, with the number of rooms dependent on final financing plans. It will have at least 15,000 square feet of meeting space, a full-service restaurant and bar, and concierge service. Average room rates will be about $150 a night.
The hotel will be directly in front of a five-level, 7,000-spot garage connected to the new terminal. As cars approach the airport, drivers will pass by the hotel on the way to the garage or ticketing.
Cagann said the project will take about 16 months to complete, so talks must be finalized by summer to get the hotel ready for the terminal's late 2008 debut. But Kish said it's still unclear whether the hotel and terminal will open simultaneously.
"I don't know how likely that is at this point," he said.
The Indianapolis Airport Authority, a government-appointed board that oversees six local airports, also is spearheading the $1 billion terminal project. That project does not include a subsidy for the hotel, but authority members wanted a hotel to go along with the new terminal.
Nationwide, airport hotels do well, according to data provided by Hendersonville, Tenn.-based Smith Travel Research. Nationally, they enjoy about a 71-percent occupancy rate--better than the overall occupancy rate of 65 percent.
Occupancy near Indianapolis' airport--an area that includes hotels in Speedway--was 57 percent in 2006, Smith Travel Research found. That compares with a 60-percent occupancy rate in the overall Indianapolis hotel market.
Even so, a 2004 report commissioned by the Airport Authority concluded that the market could support a meeting-focused hotel of at least 250 rooms. But offering more meeting space can cut into the bottom line, Hunden said.
A meeting-focused hotel for the Indianapolis airport might be a stretch, he said, because they're still rare in non-hub cities.
Even around busier airports like Chicago Midway, he said, hotels are mostly limited-service brands like Hilton Garden Inn and Holiday Inn Express that offer only small, but well-booked, meeting rooms.
This isn't Mansur's first foray into hotel development. The company did a $40 million renovation and expansion of the 423-room Omni Severin Downtown Hotel in 1987, "back before anyone thought it was a good idea to have a hotel downtown," Cagann said.
The group also was involved in the early site work for the Conrad Indianapolis before selling its interest, and assembled the property now occupied by the Hampton Inn Downtown.