Skift Take

Graduate Hotels is a company already roaring ahead with expansion into new countries and major cities. The pandemic can provide further investment opportunities for the college town-focused company to elbow into new destinations.

The rapidly growing Graduate Hotels brand doubled in size in two years. Its future isn’t so centered on being a high-end hospitality offering in small-town America.

New leadership at the expanding brand indicates the company is intent on scaling up. The company named Kevin Osterhaus its new president Monday, Graduate Hotels exclusively announced to Skift. Osterhaus previously served as chief operating officer at Ennismore and oversaw global operations for The Hoxton Brand and its expansion across Europe and into the U.S.

Graduate Hotels is one of the fastest-growing hotel companies in the U.S., and Osterhaus will play an important role in maintaining growth for the independent hotel brand at a time when global conglomerates like Hilton and Marriott flex their scale over smaller entities emerging from the pandemic downturn. 

“I do see opportunities in gateway markets, given that it’s true to the type of relationship that Graduate set out to accomplish. But I think in some of these other markets, lifestyle has a huge opportunity,” Osterhaus said in an interview with Skift. “We’re going to continue to see success in these markets. That’s where a lot of these secondary markets have been underserved.”

AJ Capital Partners launched Graduate Hotels in 2014 and focused initially on bringing high-end boutique hotels to college towns across the U.S. like Oxford, Mississippi, and Athens, Georgia. The brand has expanded to 35 properties across the U.S. and UK, with 10 openings taking place since spring of last year. 

“There’s unlimited potential, but right now I’m really excited about jumping in and helping this platform stabilize and catch up to what’s happened over the last couple of years,” Osterhaus said.

The company entered bigger cities and garnered the attention of major investors in recent years, with properties in New York City as well as the push into the UK. The brand evolution is unique, given competitors like Osterhaus’s former employer Ennismore typically locate their boutique or so-called lifestyle hotels in the world’s largest cities rather than small college towns. 

Osterhaus sees opportunity in cities of all sizes to operate a Graduate Hotel, and he isn’t ruling out the idea of further international expansion beyond the UK.

“We’re very pleased with what’s happened in Oxford and Cambridge. They’re incredible hotels. They’re both wonderful examples of what Graduate does and is now able to do that outside the United States,” he said. “I would hope that we continue to grow into similar markets globally.”

Graduate’s growth comes at a time when many major publicly traded hotel companies are touting bigger-is-better messaging on earnings calls. The global distribution of these major brands as well as loyalty programs are financial strengths to ride into a recovery, the thinking goes

But Graduate, while significantly smaller than the likes of Marriott or Hilton, still has investor appeal. 

Acore Capital, which announced a $1 billion hotel rescue capital fund earlier this year, was planning in May to make a roughly $225 million preferred-equity investment in Graduate. That transaction would enable Graduate to pay down debt on its reported $2.1 billion in real estate assets. 

Neither Graduate nor Acore have ever publicly confirmed that deal, but strengthening the hotel brand’s position coming out of the pandemic and returning to pre-crisis performance levels is a vital goal for its new president. 

“The priority most near-term is continuing to help stabilize, come out of COVID as strong as ever, and continue to drive results in each of these markets,” Osterhaus said.

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Tags: coronavirus, coronavirus recovery, graduate hotels

Photo credit: The Graduate Hotels portfolio includes the Graduate Berkeley (pictured) in California. Graduate Hotels

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