Actus Moves Forward with $600M Second Phase of Army Lodging Privatization Program

Phase two of the behemoth undertaking encompasses an aggregate 5,000 rooms at 11 installations.

September 24, 2010
By Barbra Murray, Contributing Editor

The United States Army has given Actus Lend Lease the go-ahead to implement the $600 million second phase of a three-phase project involving the renovation and development of on-post hotels through the Privatization of Army Lodging program. Phase two of the behemoth undertaking encompasses an aggregate 5,000 rooms at 11 installations.

The Army instituted the program to address the overwhelming necessity to revitalize and increase base lodging accommodations and maintain the properties over the long term. According to a U.S. Government Accountability Office report released on July 30, the U.S. Department of Defense operates approximately 70,000 hotel rooms and in fiscal year 2009, shelled out nearly $1 billion to operate the hotels in fiscal year 2009. “The real need for the Army was to deliver capital improvements to their hotels; for the government, it is a lot easier to get capital to build than for improvements on an annual basis,” Aole Ansari, Senior Vice President and General Manager, Lodging Portfolio Operations with Actus, told CPE. Actus was tapped to create a lodging development and management plan in 2006, and the PAL program has been moving forward steadily ever since.

PAL’s second phase, or Group B, will address the lodging issue at Ft. Belvoir, Virginia.; Ft. Bliss, Texas; Ft. Buchanan, Puerto Rico.; Ft. Campbell, Kentucky; Ft. Gordon, Georgia; Ft. Hamilton, New York; Ft. Huachuca, Arizona; Ft. Knox, Kentucky; Ft. Leonard Wood, Missouri.; Ft. Wainwright, Alaska; and White Sands Missile Range, New Mexico. As for what percentage of the 5,000 guestrooms will be new has yet to be determined. “We are still working out the development scope with the Army,” he said. “We’re undecided as to how the mix will layout, but the goal is to replace as many of the old hotels with new ones.”

InterContinental Hotels Group, Actus’s PAL partner, will operate the lodging facilities under the name IHG Army Hotels. Existing properties that can be refurbished will fly the Holiday Inn Express flag, while the newly developed hotels will carry the Candlewood Suites or Staybridge Suites flags.

Authorized travelers, guests who have access to on-base lodging facilities, fall into different categories that determine just which hotel type–limited service or extended stay–is most suitable. Permanent change of station travelers, comprise one of the categories. “That’s when we get more families,” Ansari said. “They require the extended stay model until they get into privatized housing on base, or offsite market housing.”

Military personnel traveling to bases in locales like Puerto Rico, Hawaii and Washington, D.C., require different accommodations, Ansari said: “They are usually traveling for meetings, so they are typically at the Holiday Inn Express properties or, in places with competitive hotel markets like Washington, D.C., they will stay at a Staybridge property.” Military personnel visiting a base for training are housed in Holiday Inn Express or Candlewood facilities.

The price tag attached to the second phase of the endeavor includes $350 million for development and construction activities for the 5,000 hotel rooms, in addition to $250 million for existing properties involved in the 4,000-room first phase, or Group A. However, Actus will be seeking a total of $1 billion in financing, according to Ansari. “Part of the $1 billion is to pay off existing debt on the project. So, we’ll invest $600 million in infrastructure and pay off some of the debt and associated costs.” Actus intends to close on financing in the second half of 2011.