JEK
Senior Insider
REAL ESTATE
JetBlue Wants to Turn Former TWA Terminal Into Hotel
New York-based airline would partner with developer to renovate jet age structure at JFK
ENLARGE
The former Trans World Airlines terminal at New York’s Kennedy Airport could see new life as a hotel under a proposed plan. PHOTO: HULTON ARCHIVE/GETTY IMAGES
By CRAIG KARMIN and
TED MANN
April 14, 2015 2:24 p.m. ET2 COMMENTS
JetBlue Airways Corp. is angling to get into the hotel business, joining the growing ranks of developers and investors looking for lodging opportunities inside major U.S. airports.
The low-cost airline and its partner, New York-based hotel developer MCR Development LLC, are in advanced negotiations with the Port Authority of New York and New Jersey for the rights to turn the iconic Trans World Airlines terminal at Kennedy Airport into a modern hotel, according to people familiar with the matter.
Talks could still fall apart, these people said, but the MCR and JetBlue partnership has emerged as the preferred bidder and is in exclusive discussions with the Port Authority. MCR would be the majority investor.
The possible deal is the latest sign that airport hotels are emerging as a sweet spot in the lodging sector as developers and investors seek new ways to tap top-tier cities without paying premiums for downtown addresses.
Airport properties have long generated reliable business from flight crews, stranded passengers and early fliers. But as occupancy levels at these hotels have reached new highs, analysts say they are increasingly attracting business from travelers who want to fly in, meet and go home, rather than spend time getting in and out of crowded downtown districts.
The municipal owners of airports, meanwhile, are looking to make their facilities more attractive by providing convenient, swankier lodging.
Competition to transform the landmark TWA site into new lodging has been fierce, attracting an array of proposals from candidates like Donald Trump, developer Related Cos. with London-based hotel company Yotel, and a group led by boutique hotelier Ian Schrager.
Other projects are taking shape across the country, from San Francisco to Atlanta. Minneapolis-based hotel developer Graves Hospitality Corp. is preparing to break ground on a $100 million luxury hotel, with spa, swimming pool and roof deck bar, at the Twin Cities’ international airport. In Denver, a Westin airport hotel is slated to open before the end of the year.
“Airport locations are hot,” says R. Mark Woodworth, senior managing director at PKF Hospitality Research, a hotel consultant and appraiser.
Analysts say these properties have become a popular route to penetrating major urban markets where opportunities may be limited. Hotel occupancy rates at airports hit a record high of 72.5% in 2014, according to data tracker STR Inc. These levels are influenced to some degree by rising levels air travel, but the steady ascent from less than 60% in 2009 suggests airport hotels are improving alongside other types of lodging.
While that level is on par with city center hotels, the average daily rate for airport hotels was about $103, or about 63% less than downtown lodging. That is largely because many of the existing airport hotels are of older, no-frills stock. Most of the new airport projects are more luxurious, allowing operators to charge higher rates.
“There is a good opportunity for investors in airport hotels to close that gap,” Mr. Woodworth says.
Benjamin Graves, Graves Hospitality’s chief executive officer, says because his luxury airport hotel will be between downtown Minneapolis and St. Paul, and will be a short drive to the Mall of America, “we anticipate we will be the highest for room rates” in the area market.
Developers often can negotiate for a monopoly, or near-monopoly, on lodging that sits directly on airport property, offering an edge over hotels that ring airports.
Some also can take advantage of cities’ plans to upgrade airport facilities and install new amenities, from designer boutiques and movie theaters to sleek rail systems that connect terminals. Denver International Airport has plans for concerts, festivals and art shows in and around the 519-room Westin hotel set to open in the fall.
“We hope this bring locals to the airport,” says Kap Malik, a design director for Gensler, the architecture firm behind the Denver project.
The developers face some unusual hurdles. Airport locations are governed by Federal Aviation Administration rules, and there are numerous restrictions around security and building dimensions, says Scott Berman, the U.S. leader of hospitality at PricewaterhouseCoopers. Windows, for example, need to be soundproofed to muffle the roar of jet engines.
“They are incredibly expensive to build,” Mr. Berman says of airport hotels. Developers might have to spend 10% more at an airport compared with other types of hotels and often have to negotiate for public subsidies to make up the difference, he added.
The campaign to transform Kennedy Airport’s famed TWA terminal to a hotel has been marked by several twists and turns. The landmark Eero Saarinen-designed property opened in 1962. With its curved, winged shape that suggested flight itself, the TWA Flight Center became an icon of the jet-set era.
ENLARGE
A rendering of the plaza area of a Westin hotel under construction at the Denver International Airport.ILLUSTRATION: GENSLER
The building closed in 2001, after TWA ceased operations. The Port Authority of New York and New Jersey in 2008 spent $20 million to remove asbestos and restore the interior to make it more attractive to developers.
Hotelier André Balazs initially won the rights to develop the hotel in 2013 but dropped out before getting started.
“It was going to take so long and we had more interesting opportunities,” he told the Journal last year.
The Port Authority relaunched the bidding process last year and narrowed its interest to MCR and JetBlue and Mr. Schrager’s group, which included private-equity firm Ares Management and New York real-estate investor Steve Witkoff for a $400 million project.
MCR intends to build about 500 rooms said a person briefed on the plan.
The hotel project, JetBlue’s first, would open across from its main terminal at the airport.
JetBlue Wants to Turn Former TWA Terminal Into Hotel
New York-based airline would partner with developer to renovate jet age structure at JFK
The former Trans World Airlines terminal at New York’s Kennedy Airport could see new life as a hotel under a proposed plan. PHOTO: HULTON ARCHIVE/GETTY IMAGES
By CRAIG KARMIN and
TED MANN
April 14, 2015 2:24 p.m. ET2 COMMENTS
JetBlue Airways Corp. is angling to get into the hotel business, joining the growing ranks of developers and investors looking for lodging opportunities inside major U.S. airports.
The low-cost airline and its partner, New York-based hotel developer MCR Development LLC, are in advanced negotiations with the Port Authority of New York and New Jersey for the rights to turn the iconic Trans World Airlines terminal at Kennedy Airport into a modern hotel, according to people familiar with the matter.
Talks could still fall apart, these people said, but the MCR and JetBlue partnership has emerged as the preferred bidder and is in exclusive discussions with the Port Authority. MCR would be the majority investor.
The possible deal is the latest sign that airport hotels are emerging as a sweet spot in the lodging sector as developers and investors seek new ways to tap top-tier cities without paying premiums for downtown addresses.
Airport properties have long generated reliable business from flight crews, stranded passengers and early fliers. But as occupancy levels at these hotels have reached new highs, analysts say they are increasingly attracting business from travelers who want to fly in, meet and go home, rather than spend time getting in and out of crowded downtown districts.
Competition to transform the landmark TWA site into new lodging has been fierce, attracting an array of proposals from candidates like Donald Trump, developer Related Cos. with London-based hotel company Yotel, and a group led by boutique hotelier Ian Schrager.
Other projects are taking shape across the country, from San Francisco to Atlanta. Minneapolis-based hotel developer Graves Hospitality Corp. is preparing to break ground on a $100 million luxury hotel, with spa, swimming pool and roof deck bar, at the Twin Cities’ international airport. In Denver, a Westin airport hotel is slated to open before the end of the year.
“Airport locations are hot,” says R. Mark Woodworth, senior managing director at PKF Hospitality Research, a hotel consultant and appraiser.
Analysts say these properties have become a popular route to penetrating major urban markets where opportunities may be limited. Hotel occupancy rates at airports hit a record high of 72.5% in 2014, according to data tracker STR Inc. These levels are influenced to some degree by rising levels air travel, but the steady ascent from less than 60% in 2009 suggests airport hotels are improving alongside other types of lodging.
While that level is on par with city center hotels, the average daily rate for airport hotels was about $103, or about 63% less than downtown lodging. That is largely because many of the existing airport hotels are of older, no-frills stock. Most of the new airport projects are more luxurious, allowing operators to charge higher rates.
“There is a good opportunity for investors in airport hotels to close that gap,” Mr. Woodworth says.
Benjamin Graves, Graves Hospitality’s chief executive officer, says because his luxury airport hotel will be between downtown Minneapolis and St. Paul, and will be a short drive to the Mall of America, “we anticipate we will be the highest for room rates” in the area market.
Developers often can negotiate for a monopoly, or near-monopoly, on lodging that sits directly on airport property, offering an edge over hotels that ring airports.
Some also can take advantage of cities’ plans to upgrade airport facilities and install new amenities, from designer boutiques and movie theaters to sleek rail systems that connect terminals. Denver International Airport has plans for concerts, festivals and art shows in and around the 519-room Westin hotel set to open in the fall.
“We hope this bring locals to the airport,” says Kap Malik, a design director for Gensler, the architecture firm behind the Denver project.
The developers face some unusual hurdles. Airport locations are governed by Federal Aviation Administration rules, and there are numerous restrictions around security and building dimensions, says Scott Berman, the U.S. leader of hospitality at PricewaterhouseCoopers. Windows, for example, need to be soundproofed to muffle the roar of jet engines.
“They are incredibly expensive to build,” Mr. Berman says of airport hotels. Developers might have to spend 10% more at an airport compared with other types of hotels and often have to negotiate for public subsidies to make up the difference, he added.
The campaign to transform Kennedy Airport’s famed TWA terminal to a hotel has been marked by several twists and turns. The landmark Eero Saarinen-designed property opened in 1962. With its curved, winged shape that suggested flight itself, the TWA Flight Center became an icon of the jet-set era.
A rendering of the plaza area of a Westin hotel under construction at the Denver International Airport.ILLUSTRATION: GENSLER
The building closed in 2001, after TWA ceased operations. The Port Authority of New York and New Jersey in 2008 spent $20 million to remove asbestos and restore the interior to make it more attractive to developers.
Hotelier André Balazs initially won the rights to develop the hotel in 2013 but dropped out before getting started.
“It was going to take so long and we had more interesting opportunities,” he told the Journal last year.
The Port Authority relaunched the bidding process last year and narrowed its interest to MCR and JetBlue and Mr. Schrager’s group, which included private-equity firm Ares Management and New York real-estate investor Steve Witkoff for a $400 million project.
MCR intends to build about 500 rooms said a person briefed on the plan.
The hotel project, JetBlue’s first, would open across from its main terminal at the airport.
