The Army is privatizing its hotels, turning their renovation, development and operations over to the private sector in an effort to improve their quality and consistency.
The move — which began with a 2009 lease agreement and is to be ongoing for many years — is part of a broader Army effort to seek new ways to make use of its existing land and assets. The service has also privatized most of its U.S. housing and has allowed builders to construct commercial office space on some bases.
In the D.C. area, the hotel privatization effort is already coming to Fort Myer in Arlington as well as Fort Belvoir in Fairfax. At Fort Myer, historic Wainwright Hall is being converted from a small 18-room inn to a significantly larger and more modern 31-room hotel. At Fort Belvoir, construction is set to begin shortly on one new hotel — a Staybridge Suites — as well as renovation of an existing facility into a Holiday Inn Express.
The effort stems from a lease deal with Rest Easy, a subsidiary of property group Lend Lease’s public partnerships unit, that allows the company to renovate old hotels and develop new ones on Army bases and to maintain and operate these facilities. Under the 50-year lease agreement, at the end of the term, the land and the hotel improvements go back to the Army.
For the Army, the privatization means hotels that the Army simply didn’t have the budget to renovate now get modernized, said Rhonda Hayes, who works in the service’s office for installations, energy and environment, heading its capital ventures unit. The inns are typically used by soldiers who are being moved between bases or traveling for training or other assignments.
“The Army had a significant amount of deferred maintenance that it needed capital to fix,” said Thomas Lewerenz, a vice president at PKF Hospitality Research. The companies that competed to privatize the Army’s hotels said “we’ll revitalize these assets and we’ll build new assets and, in turn, we’ll have exposure to this new target market.”
The project is being executed in three phases; the first included 3,200 rooms at 10 Army installations, the second is 4,800 rooms at 11 installations and the third and final — expected to close next year — would include 7,200 more rooms at 21 additional installations.
For the first phase, Rest Easy put together a roughly $133 million development program — financed by about $90 million in private sector debt and the rest from cash generated by the existing hotels. In April, it put together a second development program of about $425 million — $285 million in private sector debt and the rest from generated cash, said Charles R. Smith, senior vice president and general manager of portfolio operations for lodging at Lend Lease.
The privatized hotels — operated by a subsidiary of InterContinental Hotels Group, known for its Holiday Inn, Crowne Plaza and Candlewood Suites brands, among others — have upgraded the hotels with Internet access, flat-screen televisions and other amenities. Now, all Army hotels allow pets and provide shuttle services around bases, Smith said.
In tandem with signing onto the program with Rest Easy, the Army removed its requirement that individual soldiers on temporary assignments stay on its installations, meaning they can use their allowances to stay at hotels outside the gates. That, said Hayes, gives Lend Lease and IHG the motivation to ensure they offer quality hotels and retain government customers, and she said guest approval ratings have already markedly improved.
Smith said the portfolio of privatized Army hotels has had an average occupancy rate of 76 percent in the past three years, a significant boost over the 60 percent occupancy of commercial hotels, as estimated by PKF Hospitality Research in 2011.
At Fort Myer, Wainwright Hall is being linked by walkway to a building previously used for bachelor officers next door. The lobby is being moved from the basement to the main floor, and the site is getting a new parking lot.
At Fort Belvoir, the company is renovating three existing buildings — which should be complete next year — and building a new Staybridge Suites, set for completion in 2014 and located across from the hospital on the base. The hotel is meant to provide a place for recovering soldiers as well as their families to stay.
The four Fort Belvoir hotels will total nearly 500 rooms.