Tourism & Hospitality and Real Estate & Retail

Midfield may alter hotel-biz flight path: Hendricks County could gain from new airport terminal

February 28, 2005

Airport Expressway won't live up to its name for much longer.

When Indianapolis International Airport's midfield terminal opens in 2008, the fast track to flight will be a dedicated entrance off Interstate 70. The move will shift travelers a few miles to the south and west-and take away the direct access that

now drives them to expressway hotels.

Observers predict hotel development along I-70 will take off as the midfield project nears completion, most likely creating a new hospitality hub on nearby Six Points Road.

"We expect business to drop," said Dennis Anderson, general manager at the Days Inn Airport, off Airport Expressway just east of the current terminal. "In the airport business, the closer you are, the better."

The possible-if not probable-Six Points boom also may have wider implications.

Because most of the land around Exit 68 lies in Hendricks County, businesses that locate there will generate taxes that stay there. That's not great news for Indianapolis, which plans to use hospitality tax revenue to help expand the Indiana Convention Center.

"It creates an issue we've got to deal with," said Matt Carter, vice president of strategic development for the Indianapolis Convention & Visitors Association. "Clearly, there's a funding question."

Marion County's 6-percent innkeepers tax brought in $20.9 million last year, according to state records. Mayor Bart Peterson has proposed raising the tax to 9 percent and using the extra money for the convention center project. Any new hotel development would generate that much more money.

"Unigov, keep on going," Carter joked when asked how to address the situation. "We're a state with way too many counties as it is."

In all seriousness, the collaborative nature of tourism gives him hope that Indianapolis won't miss out on airportrelated growth. The industry has been known to overcome what Carter called "artificial political boundaries" in the past.

"We have a good track record of working together, and I don't see that changing," he said.

Communities in northern Kentucky face a similar quandary, he said, when major events in Louisville drive visitors across the Ohio River-and across state lines.

Since hotels on the Indiana side benefit, they reimburse Louisville for some of its lost tax revenue, Carter said.

"That's not unheard of," he said, citing similar arrangements in Arizona and Texas. "We try not to allow political boundaries to get in the way of success."

Such a deal isn't in place here yet, Carter said, but it is an option.

Still, it's anybody's guess at this point how a wave of hotel construction would affect existing properties.

Some operators, like Anderson, expect at least a temporary blip in business. Others insist an airport hotel is an airport hotel.

"We'll still be an airport property," said Mark Bailey, general manager of the Adam's Mark Indianapolis, which is prepping for an $8 million renovation project. "We're still just a couple of minutes away."

"The existing hotels will still do very well," concurred Mike Wells, a local developer and a member of the Indianapolis Airport Authority board. "In my real estate opinion, there's not much need for new hotel rooms."

That may explain why the airport board has backed off of early plans to include as many as three hotels in the construction project. Now, the idea is to build one 250- to 300-room hotel connected to the terminal.

"There's only so much demand," Wells said, citing recent growth at the nearby intersection of I-70 and State Road 267 and plans for a retail complex at Six Points that would include hotels.

Even so, he doesn't want existing businesses to suffer if travelers do move with the entrance. Wells said it's possible the airport would acquire troubled properties and sell off the assets.

"I think they'll be fine," he said. "If not, we'll buy them."

Others share his confidence.

Louisville-based Cook Properties is so optimistic it wants to develop a 123-unit Candlewood Suites on Bradbury Avenue, one of the spider web of side roads off the expressway.

Cook partner David Lee said customers have asked for a Candlewood on the city's west side, and placing it between the airport and downtown will broaden its appeal. Extended-stay properties like Candlewood don't typically get much in-and-out business, Lee said, so the airport-focused hotels likely to spring up down the road don't worry him.

"We're not building a transient, shortterm hotel product," he said. "Those aren't our customers."

Days Inn's Anderson was surprised to see development planned for the east side of the airport, given the pending shift. Hotels there are going to have to market themselves more aggressively, he said, and spend more to shuttle guests to the distant terminal.

He expects to weather the storm, although he's not sure about his competitors.

"I'm not worried about us," Anderson proclaimed. "If it gets down and dirty, we'll be the last ones standing."

But few predict such dire straits. Losing airport travelers doesn't have to be a death knell for existing hotels, said Carter, the ICVA strategist.

"Their approach will shift in terms of the type of business they go after," he said. "It's a natural progression."

And when the existing terminal and surrounding land is redeveloped, the new businesses there could renew demand for expressway hotels.

"That may replace some of what they lose," said Tim Dora, a partner in Fishersbased Dora Brothers Hospitality Corp. "It will be interesting to see what happens."

Dora operates a Holiday Inn Express at I-70 and State Road 267 and will break ground on a Staybridge Suites next door this spring. Both will have an "airport" label added to their names when the new terminal opens.

Expect more of the same, experts say.

"It's not really a science. It's a logical conclusion," said Denver-based aviation consultant Bruce Strand. "If you're a traveler flying into any airport in the United States, you're just not going to want to travel a long distance. Hotels that are close to the airport are more attractive than those that are farther away."
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