Mr. Loberg

Condo Hotels

University-Based Hotels Serve as Campus Living Rooms While Contributing Bottom Line Benefits

By Rory B. Loberg, President, Loberg Hospitality,

What do all of these scenarios have in common? The likelihood is all of these people will stay in the university-based hotel. Most universities and colleges want to make a favorable first impression. Whether it is for a potential faculty member, future dean, major donor or visiting parent being able to house and entertain them in their campus based lodging facility is a major advantage.

The trend over the past few years has been for more colleges and universities to add lodging products to their campus community. Some of these are single use facilities dedicated to executive education and weekend MBAs. Many are mixed use facilities that cater to all of the university departments and administration. Many of the departments on campus will have lodging and meeting needs. It is intended that these facilities serve as the front door and the living room of the campus.

One of the keys to the success of these lodging facilities is that the operator fully embraces the philosophy and mission of the campus. There will be times when campus requests and business results are not in alignment. The operator needs to understand and accept that there will be occasions that they need to be flexible and accommodate the needs of the campus.

There are key departments on campus to which the operator needs to be very close. Admissions will do a number of mailings each year to current and prospective students. A part of the mailer is normally for the parents to talk about their campus visit. An operator who has close ties to this office will be able to include a flyer to address the advantages of the on-campus facility. Once you lock in new students' parents, you have a customer for 4 -5 years.

The potential upside to the operator, a huge built in base of business, should by far to off set any potential of business interruptions for accommodating the needs of the campus community. Deans and university presidents are going to have special events and short-term visitors who need to be accommodated. Most of these facilities have a very robust weekend business demand with sporting events, visiting parents and alumni events. The operator needs to be tied into the Alumni web page and the parents' web page to be sure his property is first on the list of lodging options.

The universities that have had the foresight to make the investment in these lodging products have been rewarded many times through the goodwill, positive impact on visitors, positive exposure to major donors and visiting parents. Well-established properties like the Carolina Inn at University of North Carolina have long been the favorite place on campus to stay. The Inn has established a very strong reputation for excellent service, outstanding food, and spectacular special events that coordinate with the university calendar. Other properties that have been in the marketplace, e.g., The Inn at Harvard and The Statler Hotel at Cornell, have accomplished the same reputation with excellent service and a true understanding of the university mission.

The developers who have invested in these products have been rewarded by a steady cash flow, positive ground lease arrangements and better then average NOI returns. The operators who run these facilities and understand the university and campus mission have had great exposure to university leaders, industry leaders in executive education programs, visiting alumni and major donors.

Many universities struggle with the branded versus non-branded decision. Some universities that have a hospitality program on campus feel that a branded product will give students a better view into the lodging industry. Five years ago this would have been a good argument. There is a philosophical question universities need to ask themselves as they go through this decision making process: "Do we want a lodging product that is independent of the university and will be run purely as a profit and loss business?"

The other side of the decision is: "Does the university want a product that will embrace the mission of the university, be very flexible and adapt to the university's needs? Does it also want a facility that will be open to last minute, potentially unreasonable requests from the presidents and deans' offices?" There will be more flexibility in a non-branded product with an independent operator. Lodging products that are tied to a franchisee and are flagged have to meet the standards and programs of the parent hotel company. They will always be a brand X first and a university hotel second.

Before e-mails start flying, let me say there are good operators who run flagged hotels on a university campus. This is a result of the GM and the management team, not the flag.

The advantage of a flag used to be access to its national reservation system. Many travelers called 1-(800) Brand X to make all of their lodging reservations. Today, all operators have access to travelers through the Internet. Any hotel can be listed on Hotels.com, Expedia, Travelocity. The corporate travel office can also access most hotels through GDS (global distribution systems). A flag may be able to generate additional room nights, and it does offer points to the traveler. There is a price for every service. The cost of a franchise will be between 5-10% of room sales. There may also be a reservation charge and a charge for frequent traveler points. Most business that uses a university hotel is generated from the university administration, faculty, parents and alumni. Do you want to pay a fee to be able to service this customer base?

The other big decision is self operated versus outsourcing. Most universities are in the business of educating and preparing students to be able to succeed in the world. Most hotel companies are in the business of running successful hotels. These two may not be mutually exclusive. There are many hotels on university campuses that are self-operated and do very well. But could they be better? It is very difficult to be an independent hotel and be able to afford exposure on a national or regional level to attract enough business to be truly successful. Most national operators have a national sales team and national advertising that fill the valleys and reduce the shoulder periods.

The other major concern should be human resources. The self-operated facility may love its GM and staff, but what if something happens to one of the key members of the team? The process to "back fill" a key position for a major organization is difficult, but for an independent it is very difficult. One of the concerns I used to hear was that a large firm will "take my manager" just when he is really doing a good job. This process should be worked out during the hiring process and all parties need to agree. The difficulty is to attract aggressive young managers and have them never want to leave or grow their careers. A good operator will have a bench of managers in training. The manager from the 150-room property may be ready to move to the 300-room property.

One of the most important elements of finding a GM who will last and be successful is that including the university in the final decision-making process. Having a manager with a personality which fits into the style of the university is almost more important then experience.

When the right team is assembled to orchestrate these facilities, success is very rewarding to all members.

Rory B. Loberg is president of Loberg Hospitality, which specializes in the needs of conference centers, university based hotels, inns and non-branded lodging product across the US and Internationally. Loberg was previously President of ARAMARK Harrison Lodging which operates more than 50 conference centers, corporate training centers and specialty hotels in educational environments. Loberg was instrumental in growing ARAMARK’s Conference Center division. Loberg was previously in regional operations role with Marriott for 18 years most of which was spent in the conference center division. Mr. Loberg can be contacted at loberghospitality@comcast.net Extended Bio...

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