Wednesday, September 28, 2016

Louis Armstrong International Airport gets no bids to build hotel at new terminal

A rendering of the planned North Terminal at Louis Armstrong International Airport.

Louis Armstrong International Airport's plan for a prominent hotel at the front entrance to its new $807 million passenger terminal failed to attract interest from developers, despite an unprecedented hotel boom unfolding in downtown New Orleans. 

The New Orleans Aviation Board did not receive any responses to its recent request for proposals to build a nationally branded, full-service, 140-room hotel connected to the terminal, which is under construction and slated to be finished by October 2018.

The deadline to respond to the hotel request was Sept. 16. 

"While we are disappointed to not receive any proposals for the hotel at the North Terminal, we continue to work hard to explore all options available to us," airport spokeswoman Michelle Wilcut said in a statement. "It is our intent to have an on-site hotel at the North Terminal and we are working with our program management team to identify the best way to accomplish this."

Wilcut said the airport doesn't have new timeline for advertising the project again, but "we will be working to do this in the most expedient manner possible in accordance with all public solicitation rules." The airport had hoped to have a lease negotiated, approved by the City Council and signed by Dec. 16.

Airport leaders estimated the hotel would be a $17 million project. The city and the New Orleans Aviation Board were seeking a 30-year lease deal that would require a developer to pay about $103,000 a year in rent and a minimum of $450,000 every year to share in revenues. 

Adam Lair, managing director of HVS Consulting and Valuation Services in New Orleans, said there are already a few new hotels in the development pipeline around the airport, and developers might be skittish about too much supply in the area. 

Across the metropolitan area, the New Orleans market has added more than 4,000 rooms in 23 hotels to its hospitality stock in the last six years, according to Smith Travel Research. Developers have turned to historic tax credits to renovate old office towers in the Central Business District into hotels and apartments, while hotels continue to be developed and renovated in the Warehouse District and near the Ernest N. Morial Convention Center. Tourists and convention visitors drive demand in the city's core.

"The demand drivers out by the airport are a lot different," Lair said.

An airport hotel operator could form a customer base with flight crews staying overnight before returning to their home bases, Lair said. Airport hotels are typically at hub airports with a lot of nearby commercial development to generate corporate demand, he said.

In New Orleans, the airport-area market has an eclectic mix of customers, the including oil and gas industry.

Robert Hand, president of Louisiana Commercial Realty, said the airport is asking too much — at least $550,000 annually — to make the project attractive for a developer. "The money that they're asking makes it unfeasible if you work through the numbers," Hand said. 

Airport hotels attract companies that want a convenient place for regional employee meetings, he said. The meetings can be held at the hotel, and employees can use their evenings off to go into the city. 

There also limitations on what brand the airport could attract, he said, depending on what brands already have hotels in the area.

The new terminal project, which all-told would include nearly one-billion dollars investment including a new interstate flyover and a hotel, is slated to open Oct. 1, 2018. Armstrong has seen huge growth in passenger traffic and is on track this year to surpass its all-time record of 10.6 million passengers in 2015.

Armstrong Airport currently leases 22 gates to airlines. The new terminal will have 30 gates with an option to expand to 42. 

As for the existing terminal, concourses A, B (Southwest) and C (American, Alaska, JetBlue and others) will be demolished. The airport intends to repurpose concourse D (Delta, United) for charter services and administrative offices. 


No comments: