Luxury Boutique Hotels Become Part of the College Experience

Oberlin College in Ohio, Swarthmore in Pennsylvania and Rollins College in Florida all own hotels. Other small academic institutions, like Colby College in Maine and Williams College in Massachusetts, are also going into the hotel business. But while these colleges are the owners of upscale boutique hotels on or near campus, they are not the developers nor the operators. As Jeffrey G. Eisenbarth, vice president for business and finance and treasurer at Rollins College notes, “Colleges are good at higher education, but not so good at designing, developing, and running hotel properties.”

Still, the prospect of a small hotel near campus might seem appealing, due to a potential client mix of town and gown. However, the financial risk of owning a property, particularly in a small college town, may be a big ask from investors. But when the college itself is the owner, there are some prime opportunities for developers and management companies that understand the campus hospitality business.

The Olympia Companies, based in Portland, Maine, specializes in hotel development and management. Sara Masterson, vice president of hotel management, runs a portfolio made up of the non-flagged hotels owned or managed by Olympia. Most are campus-adjacent properties. “College-affiliated ownership has a different set of challenges,” she says. “Their goals differ from a regular hotel, and they often have diverse purposes beyond profits.” In addition to being the front door to the school for students, parents, alumni, visiting professors and other university-related business, most colleges want an affiliated hotel to reflect their values.  To that end, according to Masterson, “The hotels become mirror images of the missions of the schools they serve.”

For example, Oberlin College wanted its 70-room hotel to reflect its commitment to sustainability. Ohio-based SMART Hotels was the developer of the hotel, which meets the U.S. Green Building Council’s LEED Platinum requirements. Opened in September 2016, The Hotel at Oberlin is the first hotel in the country to incorporate solar, geothermal, and radiant heating and cooling.  Meanwhile, the Inn at Swarthmore, which opened in May 2016, is also a representation of its namesake. According to Mike Zimmerman, vice president of development for The Olympia Companies, the design of the 40-room property showcases the school’s architectural style and artistic focus. The hotel incorporates student art in the guestrooms, while the works of notable alumni are displayed in the public spaces.

For Rollins College in Winter Park, Florida, it goes a step further. When the board of trustees decided a hotel would be one of the college’s strategic priorities, it got a $12.5 million head start from the Alfond Foundation. The proviso of the grant was that future net profits from what would become The Alfond Inn would be channeled back into an endowed scholarship fund, up to $50 million or 25 years, whichever comes last. “This provides a direct link between the educational mission of the college and the hotel,” says Eisenbarth. According to Jesse Martinez, the hotel´s general manager, the scholarship fund has, to date, provided full rides for 36 students, in the neighborhood of $60,000 a pop.

The Test for Franchises and Operators

Of course, the idea of profits going to students and not to shareholders might not be appealing to franchise companies. Indeed, due to the emphasis on values over profits, this may not be a space for the typical brand. According to Masterson, for boutique luxury campus hospitality products, “franchise models are too standardized, and may not allow for the reflection of individual personality and mission of a college.” Eisenbarth adds, “Going the independent route allows you to reap more of the benefits and to stay true to your mission.”

How can a luxury hotel near a college campus work? Martinez suggests that “it is mainly about location, location, location.” Still, he says it helps when that location is not on campus itself, but a few blocks away. “Calling something an on-campus hotel could bring a different perspective. I don’t say The Alfond Inn is a college hotel, because larger clients may not appreciate the stigma.” Similarly, the luxury properties do not sport rah rah touches. In that respect, it’s a completely different concept than the model of Graduate Hotels, a midscale brand whose properties are designed to tell the story of the university they serve.

Due to a unique mix of college-related business, corporate events and leisure tourism, campus hotels can sport impressive bottom lines. According to Martinez, “When the 112-room Alfond Inn opened, we projected about $6.5 million in revenues.” In actuality, the hotel takes in about $15 million a year and averages a whopping 90 percent occupancy rate.

For developers and management companies looking to get a piece of the action, it`s important to understand the market’s unique nuances. According to Masterson, “When a project is still in the conceptual stage, it is important to paint the plan with a broad enough brushstroke  to attract non-university business.”  That’s because campus business can be seasonal, and surprisingly, may not end up being a property’s bread and butter. For example, Eisenbarth says only about 15 to 20 percent of The Alfond Inn’s business is attributable to Rollins College. In the far less touristic area where The Inn at Swarthmore is located, General Manager Rob McDevitt reports, “During the week, we are approximately 60 percent transient and 40 percent college. Weekends, we are approximately 80 percent transient and 20 percent college (with the exception of special weekends such as graduation and homecoming).”

That’s part of the reason, according to Zimmerman, why it’s important to “create a product that has a genuine connection with the college and the community, through its design, employment practices and mission. These hotels should serve as a hinge between town and gown, becoming a living room for the local community.”

As for colleges, Eisenbarth offers a syllabus of advice. “First, do the research and make sure there is a market beyond university business. Next, get buy-in from the Board of Trustees. Then, find a hospitality developer and operator who knows what they are doing, and only develop a high-quality project to match the high standards of the college.”