Army continues privatizing guest lodging
August 24, 2011
WASHINGTON (Army News Service, Aug. 24, 2011) -- The Army privatized guest lodging on 11 installations this month, continuing a program that began two years ago, bringing the service to a total of 21 posts in which hotels are now owned and operated by a private entity.
Privatization of Army Lodging, or PAL, engages the private sector to manage, build, renovate, maintain and operate transient lodging on Army installations within the continental United States, Alaska, Hawaii and Puerto Rico. The program is modeled after the Army's successful privatized family housing program, the Residential Communities Initiative, known as RCI.
The second phase of PAL began Aug. 12, privatizing lodging at:
-- Fort Belvoir, Va.
-- Fort Bliss, Texas
-- Fort Buchanan, Puerto Rico
-- Fort Campbell, Ky.
-- Fort Huachuca, Ariz.
-- Fort Hamilton, N.Y.
-- Fort Gordon, Ga.
-- Fort Knox, Ky.
-- Fort Leonard Wood, Mo.
-- Fort Wainwright, Alaska
-- and White Sands Missile Range, N.M.
Renovations are expected to begin this fall at these hotels which officials said play a key role in supporting traveling families, Army students and trainees.
It's the second phase of a three-phased approach to improve Army hotels, according to the Office of the Assistant Secretary of the Army for Installations, Energy and the Environment.
Renovations and construction of lodging under Phase II is scheduled to be completed in five years, IE & E officials said. They said the third phase will begin in two years and be completed sometime in 2018.
A total of 8,200 rooms are being turned over to the private sector -- 3,200 rooms in phase one and 5,000 rooms in phase two of PAL.
WORKING WITH PRIVATE SECTOR
The Privatization of Army Lodging's first phase, known as PAL Group A, began at 10 installations Aug. 15, 2009.
Since closing, the PAL Group A project has outperformed on all key operational, financial and developmental metrics, officials said.
Fort Polk, La., was the first installation to convert an Army facility to a 70-room Holiday Inn Express hotel with completion Aug. 4, 2010. Following this, Fort Hood, Texas; Fort Sill, Okla.; and Fort Rucker, Ala., have opened renovated Holiday Inn Express hotels.
The other garrisons in PAL Group A are: Fort Leavenworth and Fort Riley, Kan.; Fort Sam Houston, Texas; Yuma Proving Ground, Ariz.; Joint-Base Myer Henderson Hall, Va.; and Fort Shafter/Tripler Army Medical Center, Hawaii. Existing hotels will be renovated or replaced over the next few years, bringing a consistent level of facility and service to the Army traveler, officials said.
"Since privatization began, satisfaction of the guests has increased," said Rhonda Q. Hayes, director of Capital Ventures for the Office of the Assistant Secretary of the Army, IE & E.
"Standard off-post amenities such as easy-access free high-speed Internet, free shuttle services, fitness and business centers, complimentary hot breakfasts, frequent stay-points, pet-friendly rooms have been implemented," she said.
Most of the renovated facilities will be converted to Holiday Inn Express hotels and most of the new construction will be Candlewood Suites hotels.
At the Fort Polk ribbon-cutting ceremony last year, Col. Francis Burns, the garrison commander at the time, began the festivities by explaining the PAL program.
"The PAL program is a partnership between the Army and private industry to improve the condition of on-post lodging facilities and provide for their long-term sustainment. We're leveraging private capital and best-business practices today in order to sustain lodging for the next 50 years. It's really about standardization and delivering a quality product," Burns said.
Pointing to the advantages of having a recognized hotel brand on post, Burns said he was reminded of a comment provided to him by the wife of a newly assigned Soldier to Fort Polk.
"She told me, 'We prefer to stay on post when arriving as we start to become part of the community. We also prefer to stay in a known chain hotel,'" Burns related. "IHG and Holiday Inn Express combines the best of both."
Kathy Yarbrough, wife of Joint Readiness Training Center and Fort Polk commander Brig.Gen. James Yarbrough, attended the ceremony. She said she was impressed with the renovated rooms.
"These are very nice," she said. "The furniture is wonderful, the amenities are great and I believe our Soldiers and their Families will be pleased with what is available to them."
Yarbrough said she remembered when her family was first starting out in the military nearly 30 years ago.
"It would have been nice to have such a wonderful place to stay when arriving at a new assignment," she said. "I'm proud of what we are able to provide the Fort Polk family."
The Army worked with Lend Lease and InterContinental Hotels Group to negotiate the terms of the lease, the associated business agreements and the financing structure.
IHG is the world's largest owner and operator of hotel rooms by room count. To earn the right to be branded with either the Holiday Inn Express or Candlewood Suites franchises, the hotels must be inspected, and meet (and maintain) the IHG corporate brand standards.
In times of scarce resources, it is especially important that the Army partner with private industry to leverage its limited funds, officials said. In PAL the Army has contributed the existing facilities and the private sector has secured loans to recapitalize the inventory.
"Taking care of Soldiers and their families is a key goal," said Katherine Hammack, assistant secretary of the Army for Installations, Energy and Environment.
"Public and private partnerships are essential to installations and we believe that this partnership between Lend Lease, IHG and the Army is a very good example of how we are accomplishing that goal," she said.
The loans are supported by room rates which are capped at 75 percent of the prevailing lodging per diem rate as a weighted average across the portfolio. This ensures that the rates are affordable to official travelers and within Army budget expectations. The Army provides no guarantees to the private investors with regard to the loan or occupancy.
HISTORY OF PAL
Congress provided the Army with the authorities in 1996 to obtain private-sector capital and expertise to construct, renovate, improve, and sustain military housing within the United States. The RCI program leverages Soldiers' and Families' Basic Allowance for Housing paid as rent and the value of existing on-post housing assets to borrow private capital and to tap private-sector expertise in building, renovating, operating, and maintaining adequate family housing for the long term.
In 2003 Army Lodging completed a self-assessment of its inventory and it found that 80 percent of the rooms did not meet Army Lodging standards and more than $1 billion was required to recapitalize the facilities to the standard.
The time it would take to complete the work through the existing Army Lodging recapitalization approach was 25 years.
The facilities were in a condition that required both immediate attention and a plan ahead that included their continued upkeep through a funded sustainment account.
The Army considered several options and elected to endorse the PAL program in 2004 to improve the facilities and the quality of life for Soldiers.
In September 2006 the Army selected Lend Lease -- a veteran partner already working with the Army at multiple installations in the RCI program -- as the partner for the first (Group A) of the three PAL project groups. Lend Lease chose InterContinental Hotels Group as the operator and manager for this project.
The lodging privatized on Aug. 12 will be owned by Rest Easy LLC. Lend Lease will perform the redevelopment of the lodging facilities for Rest Easy. The privatized lodging will be operated for Rest Easy LLC by InterContinental Hotels Group. Upon completion of the five-year initial development period, Rest Easy LLC's 21-installation portfolio will offer 8,200 renovated and newly constructed hotel rooms for official travelers.
(Chuck Cannon, Fort Polk Guardian editor, contributed to this article)