Many capital requirements at campuses are related to cost centers and generic improvements.  The opportunity to have an investment located on campus with a positive return on investment, let alone a potentially highly profitable venture, seems too good to be true.

Nationwide in the past five years, there has been a significant upward trend in development of hotels and conference centers located on college and university campuses.  Kena Evans Thompson is a Director in the Boston office with Pinnacle Advisory Group, a national hospitality consulting firm.  Ms. Thompson has advised an array of clients including St. John�s University, Rensselaer Polytechnic Institute, and Harvard University, among others, in researching the potential demand for building a hotel facility on campus and advising university-related clients throughout the entire development process.  

Ms. Thompson indicates that the long-term goals of universities and colleges parallel those of hotel and conference center facilities.  They can be highly synergistic.  First, both entities are looking to cater to the public need for a hotel facility � for overnight accommodations, meeting space, or social venues.  In the case of the University they have visitors related to: the application process, existing students, faculty, sports teams, alumni and fundraising events.  The second goal for universities and colleges in tandem with a hotel facility is the desire for profitability.  

Before a campus board decides to go full-force into a hotel development, an outside consulting firm with specific expertise in the college and university lodging should perform a feasibility study to determine if demand exists to sustain the development of a hotel property.   The feasibility study identifies not only the existing demand to sustain a hotel property but the recommended facilities including number of rooms and square footage of meeting space and other hotel amenities and services. 

If a feasibility study indicates that the demand is evident, either internal to the university or in combination with external community demand, then development of a hotel is potentially a positive venture for a university.  If the feasibility study shows otherwise, then the demand base is not evident to support a profitable hotel.  However, if the mission to build the hotel at the university is more amenity-related in nature and not driven by pure profitability, then the project may still move forward.  

From a corporate standpoint, hospitality and profitability are interlinked for developers/operators such as Harrison Conference Centers, a division of Hilton Hotels Corporation and Marriott Conference Centers who are just two of the number of companies specializing in university and college-related hotel and conference center developments.  These organizations are highly specialized in operating not only hotel and meetings facilities, but more recently on the specialized venue of campuses nationwide.  Some examples include: the R. David Thomas Executive Conference Center at Duke University, the Center for Executive Education at Babson College, Georgetown University Conference Center in Washington D.C., and Kingsgate Conference Center at the University of Cincinnati.

Ms. Thompson of Pinnacle has also worked closely with the university clients in advising them along the path for development of these proposed hotels and conference centers. Ms. Thompson says, �Once the demand is determined to be evident, the key in the development process is to integrate the mission of the University with the operations of the facility in order to foster the greatest potential for profitability.�  

This development timeline includes: first and foremost obtaining buy-in from the Chancellor or President�s office to support the development of a hotel facility on campus.  The initial feasibility study will help to determine realistic internal and external use numbers and provide financial projections.  If the feasibility study returns positive, and the green-light is given from up above, the process moves to the request for proposal or �RFP� stage when bids are solicited from potential developers and/or operators.  From these proposals and often in-person interviews, the selection of the actual developer and/or operator can take place.  From this point onward, a partnership is formed between the developer/operator and the university in proceeding through the planning, financing, development, and, ongoing management of the property. 

Financing is the final key to the puzzle.  This is of particular concern for those universities building new.   There are many vehicles for financing a new hotel development including internal and external financing options.  Internally, many universities have the advantage of a well-endowed alumni fund, a generous alumni donor, or cash on hand that the board is looking to invest in something with a potentially high rate of return.  Alternatively, there are external financing options such as co-financing with the developer/operator or financing through bonds in the open market, among others.  

There is also the question about handling the actual real estate upon which the property will rest.  This can be handled by the university as a lease of the land to the owner/operator of the hotel facility in exchange for monthly lease payments or as a fee simple where the university would either outright sell the land to the owner of the hotel facility, remain on as a partner in the venture and potentially donate the land to the project, or maintain 100% ownership.  Often, the not for profit status of a university can impact the financing options that are the most profitable for the university.