Colossal hotel pitched: $250M project features water park, 1,350 rooms

A development team this week plans to submit a proposal to the city to build a $250 million, 1,350-room hotel complex downtown on a site where a 235-room Courtyard by Marriott now stands.

The project, just south of the entrance to White River State Park, would include a convention hotel with ballrooms; three smaller, more limited-service hotels; an indoor water park; and a 1,200-space underground parking garage.

At 800 rooms, the convention hotel by itself would rank as the city’s largest. Including the other three hotels, the complex would have more than twice as many rooms as any other Indianapolis hotel.

“We think this is one of the best pieces of real estate in the downtown area. That’s why we want to fully develop it,” said Mike Wells, president of REI Investments.

Indianapolis-based REI and Merrillville-based White Lodging Services plan to submit the proposal April 3, the deadline set by the city for developers to come forward if they are interested in being involved in a convention hotel project.

To help support the Indiana Convention Center expansion set to open in 2010, the city wants developers to create at least 800 additional hotel rooms, either by expanding existing properties or building a new one.

REI and White Lodging aren’t alone in angling for the project. Lodging industry observers say Pan Am Plaza is well-suited for a new hotel. In addition, two existing convention hotels, the Westin Indianapolis and the Hyatt Regency, could add as many as 400 rooms apiece.

Developer Michael Browning holds an option to buy Pan Am Plaza from the Indiana Sports Corp. In an interview with IBJ last month, he didn’t deny he’d like to build a hotel there, but said a number of hurdles stood in his way. For instance, he doesn’t own the three-level parking garage below the plaza.

The 497-room Hyatt, in National City Center, probably could add 400 rooms when Simon Property Group Inc. departs the building this year for its newly built headquarters. But “there are no plans for Hyatt to expand at this time,” General Manager David Jacobs said. He said he doesn’t know whether the hotel’s owner, Chicago-based Hyatt Hotels Corp., will respond to the city’s request.

The 573-room Westin Indianapolis also probably could add 400 rooms if it acquires two small, adjacent buildings along Washington Street, General Manager Mike Larson said.

He said he expects the hotel’s parent-White Plains, N.Y.-based Starwood Hotels and Resorts-to respond to the city’s request, even though it hasn’t decided whether it favors expanding the property.

Complicating discussions is the fact that the hotel is in the process of being sold. It’s one of 38 Starwood hotels that Bethesda, Md.-based Host Marriott Corp. plans to close on in mid-April.

“The new ownership of the hotel would obviously be the primary player, instead of Starwood,” Larson said. “But they are aware of this as well. They understand what’s going on.”

Connected to the action

The Hyatt and Westin already have direct connectors to the Indiana Convention Center. Because Pan Am Plaza sits across Capitol Avenue from where the Convention Center expansion will be built, its developer easily could create one.

The REI-White project would connect to the convention center via two walkways. One would extend from the hotel complex east across West Street to a state parking garage. The other would extend from the garage south across Maryland Street to the convention center.

Wells said the REI-White complex could add a direct link to the heart of White River State Park, via either a skywalk over Washington Street or a tunnel under it. He said such a connector might cost $3 million to $4 million.

Bob Whitt, executive director of White River State Park, said the link across the six-lane West Street would be a boon for the park.

“I’m definitely interested in doing something to kind of get past the psychological and physical barrier that is West Street,” he said. “It would certainly create a link that would really unite the White River State Park with that quadrant of the city.”

White River State Park includes the Indianapolis Zoo, Indiana State Museum, Imax Theater, Eiteljorg Museum of American Indians and Western Art, and the NCAA Hall of Champions.

The park counted more than 3.1 million visitors to its events and venues last year, in part thanks to aggressive marketing efforts by the Indianapolis Convention & Visitors Association.

Wells said his team’s project would give it an additional lift. The indoor water park, he said, would attract families on the weekends who also visit other downtown attractions.

Such parks-featuring water slides and lazy rivers-have become the latest craze in the lodging industry, especially in coldweather climes. The United States now has 104 indoor hotel water parks, double the number three years ago, according to Hotel Waterpark Resort Research & Consulting.

Project too big?

Operators of other hotels say downtown needs more hotel rooms. But they say the city might not need the additional meeting space REI and White want to build, or as many rooms as they’re proposing. The REI-White project would add about 1,115 rooms downtown.

“That might be a little much,” the Westin’s Larson said. “I’d be more comfortable in the thousand range and below, probably.”

But Mark Eble, a hotel consultant in the local office of Philadelphia-based PKF Consulting, said he believes the impending expansion of the Convention Center will boost the city’s convention business enough to support the additional rooms.

“On the surface of it, it doesn’t give me hives, or anything like that,” Eble said. “Just in terms of supply and demand, downtown Indianapolis could absorb that.”

The 615-room Indianapolis Marriott Downtown, built to support the last Convention Center expansion, proved a winning bet. With its 2001 opening, the supply of convention hotel rooms rose 28 percent; at the same time, demand jumped 23 percent.

That $90 million project was developed by REI, White Lodging and Kite Development. The ownership group in February 2004 sold the hotel to Bethesda, Md.-based LaSalle Hotel Properties.

An experienced team

Since developing the Indianapolis Marriott Downtown, REI and White have continued to burnish their reputations in the convention hotel business. They teamed on a 617-room, $110 million Marriott in downtown Louisville, and now are building a 449-room, $50 million Courtyard and Residence Inn by Marriott in Austin, Texas.

White Lodging, a development and hotel-management company, is owned by Bruce White, whose father, Dean White, is the billionaire owner of Merrillville-based Whiteco Industries.

Whiteco owns the Courtyard by Marriott that REI and White Lodging want to redevelop and intends to continue to hold the property, Wells said. He said Whiteco’s firepower assures the project would hit no financing snags.

Another strength of the proposal, he said, is that Whiteco already owns most of the land it would need to move forward. The White River State Park Commission owns a small, triangular parcel on the western edge of the property. But park officials say they don’t have a use for it and are open to making it available to developers.

REI and White propose demolishing a 65-room wing on the eastern part of the property and replacing it with an 800-room convention hotel, perhaps flagged as a JW Marriott or a Renaissance, another Marriott brand.

They propose converting the remaining portion of the Courtyard into a Fairfield Inn and Suites, and building the water park, a new Courtyard by Marriott and a Spring Hill Suites farther west.

“Certainly, the idea of doing this has a certain amount of vision and courage to it, with a really good goal of bringing more people to the White River State Park area,” consultant Eble said.

However, observers think competition to develop convention hotel space will be stiff, and numerous uncertainties remain. For one, Eble said, city convention officials might prefer a site farther east, closer to the center of downtown.

Then there’s the issue of incentives. Indianapolis officials say it’s too early to talk about whether public money will go to a project. However, developers say such projects always need a public component to make them viable. Wells said his project might require $40 million to $50 million.

At this point, city officials say they’re interested in developers’ ideas and aren’t picking favorites.

“Right now, we are looking at all the information that is out there, all the options. We’re certainly not making any predetermination,” said Justin Ohlemiller, a spokesman for Mayor Bart Peterson.