College and University Hotels: Five Things for Administrators to Consider When Evaluating Hotel Assets, by Matthew Arrants, ISHC
Colleges and Universities that own hotels are different than “typical” hotel owners: they are the largest demand generator for the facilities that they own; often times they are not entirely profit driven; and they’re not experts in the lodging business. On-campus lodging is often given little attention until the subject is raised by a trustee or administrator looking to house visitors to campus. In the case of existing lodging establishments, deteriorating conditions can and do reflect poorly on the school. We have identified five key areas of consideration for college administrators as they evaluate existing or proposed hotels or conference centers.
Understanding the impact of location on demand is an issue. In our experience, most administrators focus on issues like parking (always an issue on campuses), and safety (proximity to dorms). Being in the heart of campus may be desirable to visitors that are affiliated with the school. But for non-school related demand, not so much. For example, overnight visitors to the school may find the location unappealing if not proximate to support amenities like shopping, restaurants, and bars. Other non-school demand generators may want to be closer to corporate offices or area attractions. Easy access to support amenities common to most college towns is desirable. We recommend that for new properties, administrators focus on areas bordering the campus. For existing properties, administrators must recognize the characteristics of the location and take steps to address them. For example, a location in the heart of the campus that hopes to attract non-school related business may need to offer food and beverage on site and invest in marketing to increase awareness of the product. An example of a successful on-campus property is the Morris Inn at Notre Dame. That hotel is located in the heart of the campus but offers valet parking, and extensive food and beverage offerings to help attract non-school related business.
Facilities and Finish
When considering facilities and level of finish, administrators should consider their target markets. What might be appropriate for the school and the students may not necessarily help to attract guests from outside the school. For example, one campus conference center we worked with had cinder block walls and used dorm furniture in the guest rooms. Those features in themselves are not issues, but they are important considerations when considering the guests that they want to attract and how the facility may reflect on the school. Similarly, food and beverage offerings are an important consideration. Cafeteria dining may be acceptable to the market that is comfortable with cinder block walls and dorm furniture but other, more upscale travelers may want options on-property or nearby. Schools must also be careful at the other end of the spectrum. A luxury five-star property may be attractive to wealthy alumni and visiting parents, but not be received well by faculty and stakeholders looking for investments in areas, such as scholarships, dorms, and academic buildings.
Relationship with the School
The hotel guest experience helps frame the impression of the school. Therefore, careful attention should be paid to the lodging component. A bad experience at a campus hotel could influence a prospective student or faculty member’s decision to attend or join the school. Similarly, the ability to house prospective donors in a comfortable environment should be considered. The Hanover Inn at Dartmouth College does an excellent job of understanding and promoting its relationship with the school. It is well known for its “Dartmouth In Town Again” board adjacent to the elevator where returning alumni can post their name, graduation year and dates of stay.
Rather than following a typical capital reinvestment cycle, schools tend to make sporadic reinvestments based on available capital. As a result, the condition of many campus hotels is allowed to deteriorate to the point where major capital investment is needed and administrators are faced with an unpleasant decision: invest needed funds into the hotel – or into dorms, academic buildings, and athletic facilities. To avoid this situation, we encourage and assist administrators to develop a comprehensive capital plan for cyclical renovations to establish a healthy capital reserve fund.
Responsibility for lodging assets on campus typically falls to one of three groups: Administration and Finance, Auxiliary Services, or Real Estate. Rarely do the individuals in these areas have operational experience with hotels. As a result, they are at the mercy of management, and sometimes make poor strategic decisions that limit their ability to maximize the asset. Therefore, we recommend that schools hire experienced third-party advisors. Professional outside support is also helpful in situations where internal politics may be an issue by providing an unbiased professional opinion.
Hotels and conference centers are complex operating businesses that require professional management and professional oversight. For Colleges and Universities there are multiple ways to measure performance and a myriad of factors that can affect performance. We encourage administrators to consider all of these factors and hire outside professionals for support, particularly at critical times in the life of the hotel, e.g. pre-development, changes in management and for prior to renovations.
About the Author
Matthew Arrants, ISHC is the Executive Vice President of Pinnacle Advisory Group, working in both the Boston and Portland offices. As Pinnacle’s Director of Asset Management Services, Mr. Arrants specializes in asset management, development services, and operational reviews. His clients include universities, hospitals, real estate investment funds, and hotel owners and lenders. Mr. Arrants is a former Chairman of the International Society of Hospitality Consultants, a group of the hospitality industry’s most respected professionals from across six continents.
Prior to joining Pinnacle, Mr. Arrants worked in operations in various managerial capacities with Four Seasons Hotels and Resorts, and Rock Resorts. He lectures regularly at prestigious institutes of higher education. Mr. Arrants holds a Masters Degree in Hotel Administration from Cornell University and a BA in Political Science from Hartwick College.
About Pinnacle Advisory Group
Since 1991, Pinnacle Advisory Group has provided advice and analysis on the full spectrum of hospitality properties throughout the US and Caribbean: hotels, resorts, conference centers, mixed use projects, convention centers and exhibition centers. Pinnacle’s services include development counseling, appraisals, acquisition due diligence, asset management and litigation support. Our clients include leading hotel companies, REITs, universities, major banks, and municipalities. We specialize in providing personalized advice on complex projects, carefully tailoring our services to each client’s individualized needs. www.pinnacle-advisory.com