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Denver Council Rides With Westin, Nixes Bid Process for Airport Hotelier

DENVER-Westin lands a sweetheart deal with city council, which is bypassing the usual bid process for the hotelier to advance its airport project. Westin get $1.1 million to manage the property that will be city-owned in 15 years.

By John Rebchook | Updated on November 24, 2000

DENVER-In an unusual move, city officials have decided against shopping around for an hotelier for the Denver International Airport.

Experts assure the city that the deal it has hammered out with Westin, is as good as it gets. “I have personally assessed more than 2,000 hotel deals, and this is as strong as an agreement as I have ever seen,” says Greg Hartmann, a principal of Boulder-based HVS International Hospitality Consulting Services. Westin will be paid a $1.1-million management fee, which accounts for about 3% of the annual revenues projected from the 500-room hotel scheduled to open in late 2003. Typically, a top-notch operator such asWestin would charge 4% to 6% of total revenues, Hartmann says. At the end of the 15-year management agreement, the city will own a hotel with an estimated value of $175 million. Westin also will fund a working capital account – equal to 8% of revenues – earmarked for a periodic refurbishing. It is considerably more than is usually allocated in such agreements, Hartmann says.

Taking bids from other operators would delay the project by nine months and it’s doubtful the city would get such a good deal, Vicki Fowler Braunagel, deputy manager of aviation has told the DIA Stapleton Committee, comprised of city council members. The pact calls for channeling DIA funds to pay for the project because of the tight private financing markets for hotels. No tax dollars are used or pledged for the project, Braunagel emphasizes. She also predicts the hotel will generate about $57 million in additional tax revenues to Denver over the next 15 years.

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