The Indianapolis Airport Authority board this month approved spending up to $8.8 million to help fund construction of a hotel connected to the midfield terminal set to debut Oct. 28.
But delays in finalizing a deal with developer Mansur Real Estate Services means the $50-million-plus Westin will not be ready for guests until August 2009 at the earliest. The airport board picked Indianapolis-based Mansur to build the hotel nearly a year ago.
"We're still talking about what it's going to look like and what we can afford," said John J. Kish, executive director of the Indianapolis International Airport, which gets funding from federal tax dollars and gate fees it charges airlines.
The hotel will take about 18 months to build, and construction won't get started until there's a final deal.
Messages left with Mansur President Charles Cagann were not returned. But Cagann said last March that plans called for a 250-room Westin-linked to the terminal via a massive parking garage-that likely would cost more than $50 million.
While the project is still a go, the financing environment is radically different than a year ago, industry observers said. With defaults in subprime lending and talk of recession looming, banks are being more cautious.
"The lending market has tightened significantly," said Rob Hunden, president of Chicago-based hotel consultant Hunden Strategic Partners. "Every deal is undergoing a lot more scrutiny, and banks are demanding more comfort and guarantees."
It's not uncommon for banks to require developers to bring 30 percent of construction costs to the table in cash, for example, almost double the norm of just a year ago.
"It's extremely difficult now because the developers are required to put in more of their own money," said Bill Morton, a consultant in the local office of Philadelphia-based PKF Consulting Corp., which analyzes finances for hotel projects.
If the airport board contributes the full $8.8 million, it would cover more than 17 percent of expected construction costs. That's more than the 16 percent city subsidy offered to the $300 million JW Marriott convention hotel planned for downtown, but less than the 29 percent the $100 million Conrad Indianapolis received.
"It seems relatively reasonable," said Hunden, adding that it's difficult to say for sure until details of the final deal are released.
While airport officials and Mansur work out an agreement, several other hotels are popping up just across Interstate 70 from the new terminal.
Locally based Schahet Hotels Inc. will be first out of the gate. It's slated to open a 119-room Hampton Inn & Suites at the airport exit in November. Then it expects to debut a 126-room Hilton Garden Inn in January.
South Bend-based Holladay Properties is developing a 300-room hotel as part of the Purdue Accelerator Park at Ameriplex Indianapolis, south of I-70 and directly across from the new terminal.
Holladay Senior Vice President Chris Wilkes said the company is still talking with several brands, but is looking at a full-service property. Holladay wants to open the hotel by the second half of 2009.
Indianapolis-based General Hotels Corp. also is planning an Embassy Suites at the exit, according to several sources, though company officials declined to comment.
Hotels at the current passenger terminal will run shuttles to the new terminal and try to compete with the new Westin.
But launching well after the competition shouldn't hurt the airport Westin's chances, said Schahet CEO Jeffrey Brown.
"Having a property right in the airport is different than being outside," he said. Though Schahet's two properties will run shuttles to the airport, they will depend on interstate traffic, too.
PFK's Morton agreed the Westin's terminal connection will outweigh any delay.
"It'd be nice to be the first [hotel] open, but being connected is going to be huge," he said. "They'll be able to get a rate premium just based on the convenience factor."