The IHG Army Hotel at Joint Base Lewis-McChord is shown in this undated file photo. (IHG Army Hotels)
The Army plan to have private companies operate on-base lodging has transformed the accommodations from old cinder-block buildings without working fire alarms to nationally branded hotels with quality standards.
However, the service needs to improve how it reports the cost savings and construction plans to Congress, a government watchdog found.
Private companies operating Army hotels began in 2009 and the service’s last required update to Congress occurred a year later, leaving lawmakers in the dark on significant changes and delays related to construction and renovation of facilities, according to a report released Tuesday from the Government Accountability Office. The 2020 National Defense Authorization Act called on the office to review the program.
“Privatization included constructing new hotels, and it has improved on-base lodging. But improvements have taken longer than expected and plans have changed — information not included in reports to Congress. We also found Army estimates likely overstate how much this effort reduced costs,” wrote Elizabeth Field, the report’s author and director of defense capabilities and management at the GAO.
The Army estimated a cost avoidance of about $606 million for official travel lodging costs from fiscal years 2009 through 2019, according to the report. However, the service used a baseline that is higher than what the Defense Travel Management Office uses and what off-base commercial preferred hotels might charge.
The service also chose to replace more hotels than it originally told Congress in 2010, but failed to update lawmakers on its plans. The Army predicts construction stretching into 2029, according to the report.
The Army is the only service with privatized hotels at U.S. bases and the program includes 13,048 rooms at 75 hotels across 40 bases, according to the report. Its decision to privatize came after a 2003 assessment determined that more than 80% of its hotel facilities needed replacement or renovation with a cost estimate of more than $1 billion, according to the GAO.
Most visitors to the base hotels are service members on temporary duty, civilian employees on official business or military families moving duty stations. Nightly rates are determined using a percentage of the local rate authorized to military travelers.
“Our top priority is to deliver lodging accommodations that meet the unique needs of today’s military travelers,” Gretchen Turpen, senior vice president and director of lodging for private company Lendlease, said in response to the report. “The operational efficiencies, new hotels and renovations afforded by privatization better serve those needs and align with the Army’s objectives of the [private lodging] program – improve the quality of life of military travelers and their families.”
Field issued recommendations to the defense secretary to provide to Congress details on facility improvements, timelines for projects and significant changes to development plans. The report also recommended requiring the Army to evaluate how it calculates cost avoidance from the program, establish a standardized reporting of lodging across the service branches, and assess the extent that Defense Department personnel are inappropriately skipping on-base lodging for other hotels and determine how to address any issues it finds.
Paul Cramer, acting assistant secretary for defense for sustainment, responded to the report last month and agreed with all recommendations. In a memo to Field, he said the department will move forward on each point.
Lendlease’s Turpen said they work “diligently with our Department of Defense partners to ensure transparency and efficiency across our day-to-day operations along with our development projects.”
While all congressional reporting requirements were met by the Army, continued collaboration and communication with stakeholders is important, she said.
Similar to privately run family housing, privately run Army lodging operates as a single project under the terms of a 50-year lease with the real estate developer Lendlease, which manages housing at some Army bases.
Lendlease is responsible for constructing and maintaining new hotels, which it operates under the brand and standards of InterContinental Hotels Group’s extended-stay hotel brands — Candlewood Suites and Staybridge Suites. Renovated existing facilities must meet the standards of the Holiday Inn Express brand. InterContinental Hotels Group handles the day-to-day hotel operations.
No other service branch is actively considering a plan to privatize, but as of this month, the Navy, Marine Corps and Air Force transitioned their hotels to no longer use any funding appropriated from Congress, according to the report.
Air Force officials told the GAO that they are interested in considering all options for reforming their lodging, including privatization, third-party management and franchising.
As of March 2020, 64% of the Army’s lodging facilities were branded as Holiday Inn Express, Staybridge Suites, or Candlewood Suites hotels. The only Army hotel not run by a private company in the U.S. is at the Judge Advocate General’s Legal Center and School in Charlottesville, Va., according to the report.
Since Lendlease took over the lodging program, the average age of an Army hotel room went from 42 years old to 29 years old, according to the report.
One in five Army hotel rooms available now was built within the past seven years, Turpen said.
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