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Master Class

Going on campus is one smart investment for these hotel companies

Monday, June 17, 2013
Jeff Heilman
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The presence of hotels at or near U.S. colleges and universities is nothing new. Some, like the Nassau Inn (Princeton University), Hanover Inn (Dartmouth College), Dahlmann Campus Inn (University of Michigan) and Nittany Lion Inn (Penn State University) are historic haunts long treasured by returning alumni for football weekends, weddings and special events. Others serve a distinct purpose at their schools, such as The Blackwell Inn, the only on-campus hotel and conference center at Ohio State, or become an extension of campus life, such as The Claremont near UC Berkeley.

Hilton Garden Inn (HGI) is one brand that has carefully studied this niche market, and as HGI's vice president for brand performance and sales Don Willingham explains, “going to school” is a wise investment.

“Our overall expansion strategy prioritizes locations that make sense from a profitability standpoint, and in looking at the college market, we found a recession-resistant environment that favors positive returns for our owners,” says Willingham, who is based at HGI’s Memphis, Tenn. headquarters. “Especially attractive is the built-in year-round demand that colleges offer, along with the diversity of demand generators,” he continues. “From sporting events, parents’ weekends and commencements to conferences and summer programs, it’s a demand that does not go away.”

Currently offering more than 560 properties worldwide (mostly in the U.S.) with another 120 in the pipeline, HGI’s U.S. expansion strategy includes a number of mostly new-build properties at or near college campuses. In February 2013, for example, the 135-room Hilton Garden Inn Stony Brook opened at the entrance to the State University of New York's Stony Brook campus on Long Island. With academic neighbors including the University of Rochester, Rochester Institute of Technology and Nazareth College, the 107-room Hilton Garden Inn, Rochester/Pittsford, in upstate New York, opened in May 2013.

Slated to open this September, the 128-room Hilton Garden Inn Durham University Medical Center is ideally situated to serve Duke University and Duke Medical Center, while the 147-room Hilton Garden Inn, Redondo Beach in California, scheduled to open next spring, offers easy access to Everest College, El Camino College, Westwood College and University of Columbia.

Among HGI’s conversion projects is the forthcoming Hilton Garden Inn Knoxville/University. Following several prior flag changes, the 118-room property, due to open this summer, sits directly across from the dorms at the University of Tennessee.

“So far, 2013 has been one of our best years ever, which will only enhance our ability to capture more market share,” Willingham says. “With campus openings part of our strategic mix, we anticipate opening 20 new properties overall this year and next, and getting back to between 40 and 50 a year by 2016.” With creating profitability “priority one,” HGI owners are clearly satisfied. “About 75 percent of our new deals come from existing franchisees,” says Willingham.

HGI first establishes its presence on campus by building relationships. “Our local sales teams and brand managers may meet with a number of independent decision makers at a given school, from administration to the athletic department,” Willingham explains. “The goal is to effectively communicate our value proposition while also exploring ways to blend with the school’s image and identity.”

Aligned with its positioning as an upscale mid-priced brand targeted to mid-market travelers, HGI’s value statement includes affordability, convenience, and as Willingham emphasizes, “the built-in quality that our guests recognize in elements such as our full breakfast, complimentary high-speed Internet and fitness center.”

In terms of creating what are generally unofficial but otherwise visible and effective tie-ins, common approaches include meeting room nomenclature related to some aspect of the school, or having the staff don school colors on football weekends and other sporting occasions.

“The schools appreciate the extra effort,” says Willingham, “and then there is also the added benefit of a built-in labor pool.” Students interested in a career in the hotel industry, he says, have work opportunities ranging from housekeeping to front desk to night audit. As Willingham also notes, this in turn benefits HGI. “At the brand level,” he says, “it gives our managers significant credibility to say they have worked their way up from the ground floor.”

Another prominent player in the campus hotel category is Atlanta-based Davidson Hotels & Resorts, one of the nation’s largest hotel management companies with 46 managed hotels comprising approximately 13,200 rooms.

Accounting for almost one-quarter of these are the 11 properties forming Davidson’s “university-related portfolio,” including the Westin Annapolis (U.S. Naval Academy), Sheraton Iowa City (University of Iowa) and Renaissance Baton Rouge Hotel (Louisiana State University). Interestingly, one HGI property, the San Francisco/Oakland Bay in Emeryville, Calif., about 20 minutes from UC Berkeley, is one of four Hilton properties on the roster.

In May 2013, the company announced plans “to “significantly” expand this collection within the next two to three years. “College towns tend to be very stable, predictable markets that attract a combination of university-related, meeting, business and leisure guests, each requiring highly targeted marketing and service programs,” said John Belden, Davidson’s president and chief executive officer, in connection with this announcement. Citing the company’s “in-depth expertise in optimizing revenues while holding down costs” and “strong, proven track record of improving profitability for these special-market hotels,” Belden calls the category “a logical and attractive expansion vehicle for us.”

Similar to HGI, Davidson pursues synergistic relationships with the campuses it serves, including developing strong training programs and regularly recruiting students. Leveraging its understanding of the business and dynamics of on-campus events and commerce, Davidson is also able to add significant economic value to its university-related properties.

“Our current portfolio contains more than 1,000,000 square feet of meeting, conference and convention space providing us with experience and depth in group, conference and association markets, many of which tap into the university system for content,” stated Steve Margol, Davidson’s chief investment officer. “Our strong focus in F&B, resulting in our reputation for well run and profitable restaurants and catering/banquet functions, has created some of the highest F&B profit margins in the industry,” he added.

Top grade service is another integral element of the Davidson model. “We understand not only the economic importance of a successfully run university hotel, but also the quality levels that students, administration and alumni can be proud of,” Belden said. “The care and treatment necessary for alumni, boosters and potential academic and athletic recruits also are critical components that Davidson provides its university hotel guests.”

Also enhancing the company’s competitive position, as Belden notes, is “the lack of noticeable industry focus on this unique niche.” Wise words for potential investors: “night school” is in session.

Jeff Heilman
Hotel Interactive® Editorial Division
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