CHICAGO—Many college towns in the United States have hotels—some even owned and operated by the schools—but Graduate Hotels is the first attempt to a create a chain of university-themed properties.
AJ Capital Partners, a real estate development and investment firm, launched the brand in August and plans to open its first two properties next month in Tempe, Arizona, home of Arizona State University; and Athens, Georgia, site of the University of Georgia. The company plans additional openings during the next year in Oxford, Mississippi (University of Mississippi); Madison, Wisconsin (University of Wisconsin); Charlottesville, Virginia (University of Virginia); Bloomington, Indiana (University of Indiana); and Raleigh, North Carolina (North Carolina State University).
Jasin Alfaro, COO of AJ Capital Partners, said it’s important the company establish its presence quickly and expects 20 to 25 properties to open within the next 36 months.
“We want to flood the market as quickly as possible, and this first-mover advantage is something we were focused on from the start,” Alfaro said. “We’ve raised enough capital to do $500 million to $600 million worth of deals, so it’s more about finding the right assets quickly rather than doing one-offs and then trying to figure out how to raise the capital for them.”
While most properties in the Graduate Hotels portfolio will be conversions from other brands or independent hotels, Alfaro said the company will consider new developments. Its hotel under development in Oxford, Mississippi, is new construction, and he said the company is considering at least two other new builds.
The right markets
Christian Strobel, president of Graduate Hotels, said while most college towns are good markets for the chain because of their stability and predictability, others are even more dynamic.
“The great markets are the ones that include a combination of a university and other big demand generators,” he said. “A good example is Madison (Wisconsin), which is also a state capital, so you have both the university and the business that surrounds a state capital. That can create compression.”
He also cited Ithaca, New York, which has two colleges but also strong summer business from leisure travelers visiting the Finger Lakes region of the state.
“In many cases people are moving back to these towns to retire to take advantage of the positive, young energy and the low cost of living relative to the amenities,” Strobel said. “And, as the economy shifts toward technology-focused companies, people are setting up businesses near their alma maters because they can tap into the networks and resources of the college.”
Creating a community
Strobel said some inspiration for the chain came from the Hotel Lincoln, a boutique property in Chicago’s Lincoln Park neighborhood. AJ Capital Partners owns the property, which is operated by Joie de Vivre Hotels, where Strobel had been a development executive.
“When we first floated the idea of the Hotel Lincoln, a lot of naysayers said it’s a residential neighborhood and no one will want to stay there,” Strobel said. “But the Lincoln has become a living room for the people of Lincoln Park. That’s what we want to create in these college towns because they’re not unlike a neighborhood. They might not have the demand generators of the big (metropolitan areas), but they are very tight communities.”
The Graduate product, which Strobel described as a “midscale hotel with (food and beverage) and a lifestyle focus,” will reflect the community and the university—but not in an obvious way.
“We’ve noticed in many hotels in these towns, the owners try to incorporate the college’s marks and colors everywhere,” he said. “We want to develop a stronger connection to the community so we weave in stories a couple layers deeper.”
In Athens, Georgia, he said, the easy thing to do would be to decorate the hotel with photos of the school and lots of bulldogs, which is the university’s mascot.
“We dug a little deeper and found that football was brought to Georgia by a chemistry professor who created the first football club at UGA. As a result, we’ve included some subtle references to that, including chemistry symbols, throughout the hotel,” Strobel said.
Strobel said these connections to the community will resonate with a variety of guests.
“People are traveling to these towns for emotional reasons: They might be going back for an alumni weekend or showing their kids where they went to college, or they’re attending a reunion. These aren’t mundane reasons. This isn’t a chemical factory where people are going to sell product,” he said. “We believe a subset of the market will prefer to stay someplace that celebrates the town in a way that other hotels don’t.”
These connections extend to the group’s marketing strategy, which relies on electronic word of mouth.
“It’s about getting them in to try it and then having them connect with each other,” he said. “Once we have created something that is relevant people will talk about it on their networks of social media. Some of these universities have LinkedIn or Facebook groups with 200,000 to 400,000 members.”