May 9, 2024 - News

Indianapolis is a hot market for hotel projects

New hotel in Indianapolis

Signia by Hilton is a hotel project poised to transform the Indianapolis skyline. Photo: Courtesy of Hilton

As a number of major Indianapolis hotel projects take shape, the Circle City has emerged as a top spot for new guest room construction.

Why it matters: The local tourism market is riding a wave of momentum generated by 2024 events like the NBA All-Star Game, the total solar eclipse and the arrival of Caitlin Clark.

  • But tourism leaders warn that the marquee conventions and major sports attractions Indy has come to rely on may outgrow the city without more hotel space.

Driving the news: According to data provided to Axios from CoStar, a global provider of real estate data and analytics, Indianapolis ranked 12th in the nation for the number of new hotel rooms under construction, with more than 2,300 rooms across 15 hotels.

  • Indy was the only Midwest city to make the top 15. New York led the way with more than 8,300 rooms under construction across 53 hotels.

What they're saying: "It looks like investors and developers are looking at that market and they're saying, 'This is an opportunity,'" said Jan Freitag, national director of hospitality markets analytics for CoStar.

  • "They're saying, 'I can build a property here and get good returns. So let me just put a shovel in the ground and move forward, no matter the current interest rate environment.'"

State of play: The largest hotel project under development is the 40-story, $710 million Signia by Hilton hotel at the Pan Am Plaza site that will add 800 rooms and connect to the expanded Indiana Convention Center when it's complete in summer 2026.

  • Meanwhile, construction is expected to start later this year on the $140 million project to redevelop Old City Hall into a 32-story mixed-use tower with a 21c Museum Hotel by 2028.
  • The historic Odd Fellows building at the corner of Pennsylvania and Washington streets will be the site of an $85 million, 130-room Kimpton Hotel targeting a late 2025 debut.
  • A 128-room Aloft hotel being developed in a 126-year-old building at 136 E. Market St. is opening later this year with a hotel bar with a sidewalk café presence.
  • And making its debut the soonest is The InterContinental Hotel, a 170-room luxury hotel opening this fall at 17 W. Market St. The $101 million project features a rooftop bar, views of the Soldiers and Sailors Monument and two additional restaurants.

Between the lines: The city is on the hook for three of those projects.

  • After developer Kite Realty Group failed to secure funding for the Signia by Hilton project, the Indianapolis City-County Council approved $625 million in hotel revenue bonds to finance it. The city will also pay $54.3 million for the purchase of the property.
  • For the Old City Hall redevelopment, the city proposed the use of a single-site TIF district to help finance the project, which the City-County Council approved in December.
  • A single-site TIF is also supporting the funding of the Kimpton project.

What we're watching: If Indianapolis' new hotel offerings satisfy travelers who are embracing luxury stays over saving cash.

  • "The main headline for the U.S. is bifurcation. What we mean is at the upper end of the market … those types of properties have done quite well, and we expect them to continue to do quite well," Freitag said.
  • "But the U.S. hotel industry is struggling on the lower end, and economy-type properties have lost room demand."
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