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When the first Study at Yale Hotel opened, the year was 2009. Needless to say, it was a tough market at the time.
“It was probably the worst economy in our lifetime,” said Paul McGowan, founder of Study Hotels.
It wasn’t until nine years later that McGowan and his team would open a second property, The Study at University City in Philadelphia. It opened early this year. In 2019, McGowan plans to open a third Study Hotel near the University of Chicago.
The first Study at Yale Hotel was a pioneer in developing the co-located university campus boutique hotel, a trend that has now flourished. This is most evident in the growth of rival Graduate Hotels, which opened its first hotels in 2014 and now has 10 properties across the U.S., primarily in secondary markets but now venturing into primary ones like Seattle and New York City.
But unlike his competitors, McGowan is content with building growth at a slower, steady pace.
“Speed wins in certain sectors, I guess,” he said. “I’m not sure where that strategy comes from. Certainly, it’s not the playbook that we’ve chosen.”
He continued, “Speed is not our priority. We’re all about trying to create really good long-term value and deliver on the promise to become something that is a proud place for any of these institutions to be affiliated with.”
At a time when nearly everyone else in hospitality wants to go asset light, McGowan and his company, Hospitality 3, owns, develops, and operates all of its hotels.
“We own, develop, and operate our own facilities,” he said. “We’re deeply invested in all of them. That’s very unusual.”
McGowan said that because every Study Hotel is full service, “it takes a lot more to operate hotels at that level and to do it effectively and efficiently over time.”
He added, “We’re not in every market, we’re not in every secondary market, buying up an existing asset and converting it and promoting a brand that is meant to accommodate a different tier than what we’re looking for. We’re trying to stay in more urban markets.”
As for what lies ahead for the growth of Study Hotels, McGowan said, “We’re in discussions with a number of top 10 [universities] in the country. We expect to be planting our seed in each one of them. They’re coming to us for all the reasons that I spoke of. We’re not flashy, we’re not trendy, we’re not a flash the pan. We’re trying to build a brand that has long-term value and become part of the school culture.”
What Goes into Building a Boutique Hotel Brand with Long-Term Value
When it comes to building Study Hotels into a brand, McGowan said that he shies away from too many trends or too much reliance on technology. The first property, he said, was the result of a real estate opportunity and addressing a need for upscale lodging.
“New Haven in Yale was unique in that there was really nothing there that was accommodating that kind of upper tier or high end of the market that we knew existed, the kind of demand that existed for the more affluent travelers that were coming to Yale, either visiting children or bringing students there for interviews or what have you, or even recruiting purposes,” he said.
And when it comes to technology, he said, “Those hotels where people check in without even stopping at a front desk — to us, that’s just not the way we want to go. We want to go the opposite direction.”
Building a brand wasn’t at the top of his priority list from the beginning, either.
“When we set out to launch the property there, we weren’t really thinking about a brand, but decided to put some thought into soft branding at the time and saying, what are the key attributes that we would take forward if we were to launch a second, third, or fourth hotel in the future? In doing so, we basically took a hard look at what the hotel business is all about, what we’re offering to guests, trying to stay away from what I call kind of hassling our customer.”
What came of that exercise was the Study at Yale.
“In calling it the Study was a good example of how we landed on a term that was representative of something very traditional and maybe something that you might recall from, say, your childhood at a grandparent’s house or something, and then bring that forward to something that resonated through a more contemporary lifestyle,” McGowan said. “We put leather chairs and ottomans in each guest room. Our mantra of ‘read, rest, reflect,’ is all about trying to get people to kind of slow down a little bit, kick their feet up, not create an environment that was pretentious in any way, but comfortable, relaxed, but still inspiring and more intellectual and mature. That’s really the kind of direction that we were heading in.”
And with each property, McGowan said he pays close attention to the universities where his hotels will be. “Each of these universities has their own distinct personality and culture and character,” he said. “For us, that’s an incredible opportunity to just take what’s given to you and kind of bring that into the hotel experience.”
Examples of this include Study at Yale’s partnership with the Repertory Theater located across the street, and the fact that the hotel sells books from Yale authors and sponsors Yale athletics.
“We take every opportunity we can to make very deep, meaningful, and relevant connections with the institution that have been reflected in the experience of the guests,” McGowan said. “It’s more than just painting the wall blue and saying, ‘Boola Boola, it’s Yale.'”
He said the same method applied to Philadelphia and will to the upcoming hotel in Chicago, too.
“I know enough about branding to understand where we needed to put enough meat behind whatever we wanted to call ourselves, but also know that certain attributes that we’ve landed on would need to be portable, would need to travel with us to each location, and not be overstated or over-played, but allow us the flexibility to create this kind of character and personality that the school would actually give us,” he said.
McGowan credited his time at Starwood Hotels & Resorts’ W Hotels as the senior vice president of design and construction for giving him an education in boutique branding.
“The mandate from our chairman at the time, Barry Sternlicht, and the vision that he had was to kind of go counter to everything that the industry was doing,” he said. “Take the term ’boutique hotel.’ It really just came from a place that nobody really understood at the time, except that these properties were unique and differentiated from everyone else. We took that and tried to bring it to a mass-market brand in a large company that had tremendous marketing capacity.”
He continued, “That whole process taught us a lot about what was important and what wasn’t, what some of the paradigms that we were constrained by over the years, and how we would break those down and figure out how to kind of think more freely in developing a brand that was catering to a market that really hadn’t been proven yet. There was an awful lot of takeaway from that process.”
On Staying Asset Heavy, For Now
The freedom and flexibility of being the owner, developer, and operator of his hotels has helped McGowan craft Study Hotels, and he said that, at least for now, he intends to stick to that formula. But he hasn’t ruled out going asset light in the future.
“It suited our purposes in the beginning, I think,” he said. “As we grow, we may change that formula, but up until now it’s been important first of all, to understand the operating side of the business. We didn’t set out to create a management company, but we’ve now become one because we manage our own assets. That was about a decision to really want to understand the operating side of the business. It all ties together at the end of the day.
“If you can’t operate efficiently and prove your numbers out, then it’s very difficult to continue to grow through any sort of development model that has kind of the pressures that occur in the development cycle these days. It’s important to us to be involved in all of it so that we understand the give and take, we understand how much we can invest, what’s a safe place, where are the safe places, how insulated are we from the emergence of the economy and competition of other things? We feel it’s the best formula for us going forward.”
The Challenges of Being Truly Independent
The freedom and flexibility of being independent can be both a benefit, and a challenge, however. McGowan said a lot of the challenges relate to marketing.
“Marketing as an independent is more challenging today than it’s ever been,” he said. “We feel like the Internet is a very, a wonderful place to do business, but it’s also a very difficult place to do business if you’re a small, independent operation. The pressures that come from online travel agents and other forces that exist in that realm make it difficult for us small guys to get our point across and to reach our customer. We have good resources up at this point to really go at that in a way that is a little bit old-school, but we think it’s very effective, given the kind of markets that we’re operating in and expect to operate in going forward.”
One advantage, he said, is that Study Hotels knows its core customer market, thanks to the universities. “We don’t have to reach too far to find them. It’s just about getting creative and finding new channels and new ways to do that. Once we get them, we’re very confident that we’ll build the loyalty that we need to keep them in the long-term,” he said.
McGowan said he relies “very little” on online travel agencies for distribution but wouldn’t give an exact percentage or range. He said his website was the No. 1 distribution channel for the hotels, and that good public relations has helped.
“We know the population that exists in each of these universities and we’re reaching out to them directly to market our product. That seems to be the most effective way for us,” he said.
He said that while he has been approached by soft brand collections from the major hotel chains, he isn’t inclined to join one.
“With the soft brands, we don’t think our customer is a loyalty program customer as much,” he said. “I mean, they might use loyalty programs. I don’t think, that’s how they’re making their money decisions, however. I think that there is some value that’s offered by some of the soft brands. Knock on wood, up until now, we haven’t really had to rely on that. Our marketing plan going forward is to try to avoid that.”
That being said, the increasing amount of consolidation taking place among the major hotels brands hasn’t gone unnoticed.
“The bigger brands are focused on scale and timing and we’re not,” he said. “We’re focused on our customer, and I think that’s probably the biggest differentiator that you’ll see between what we’re doing and what any of these other branded companies are doing. I think the consolidation will continue just by nature. I think that’s what will happen. As some of these smaller companies have success, they’ll be picked up by some of the larger companies. Those marketing machines will just continue to expand. That’s a great model. It works very well when you get to large-scale companies, like Starwood and the Marriott and some of the bigger players. For us, it’s really kind of an on-the-ground, localized effort.”
Despite the lack of a formal loyalty program, McGowan said his hotels use guest feedback and strong ties to the universities to surprise and delight customers. Guests often get free tickets to Yale sporting and theater events, and complimentary food and beverage in the lobby. Attracting students and their parents has also helped build loyalty for the hotels.
“The students pick up on that. They talk amongst themselves. The parents hear about it. The loyalty builds, it’s just organic,” he said.
What’s Next for Study Hotels
The third Study Hotel, a 185-room property at the University of Chicago, not far from the Obama Presidential Library, is in the early stages of development and is expected to open in 2019.
McGowan said there are plenty of other developments in the works. “We have quite a few irons in the fire,” he said. “They take a few years generally, because of the way that institutional funding works. We’ve got some very, very exciting prospects on the horizon that you’ll be hearing about soon in very early stages of discussion. Very similar in their characteristics in terms of being prominent universities with multiple dynamics in the market to support what we’re doing, and very unique and interesting personalities and cultures that we are really excited to dive into.”