The business of running a business: hospitality industry managing more and more collegiate conference centers

There appears to be a growing trend in the expanding world of campus conference centers.

Colleges and universities that have never before considered the
benefits of operating a profitable establishment are suddenly looking
at conference centers and hotels as potential sources of support for
their more traditional programs. And some institutions that have been
operating such properties themselves are turning management of the
facilities over to companies experienced in the hospitality industry.

Analysts watching the trend say that there is lots of money to be
made in the relatively untapped market of college- and university-owned
hotels and conference centers — troth for the schools and for the
management companies.

“It is definitely a trend — not only to manage them, but to
develop them as well,” said Rachel Roginsky, a Boston-based hospitality
industry consultant who works closely with colleges and universities
and is a member of Pinnacle Advisory Group. “Conference business at
universities is pretty strong, and [the universities are] using other
places — other hotels that they are paying money out to. They’d rather
keep the revenue streams in house and possibly make some money.”

A number of factors has contributed to the appearance of conference
centers and hotels on campuses across the United States, according to
people familiar with the industry. They cite increased interest in
executive education, and the wide availability, a decade ago, of
financing for building such facilities. Turning the management of
conference centers and hotels over to the private sector began a few
years ago, when the economy weakened and the hospitality industry
became increasingly competitive.

“The academic world is an excellent world in its own right, but it
doesn’t operate like the hospitality industry,” said Burt Cabanas,
president and chief executive officer of Benchmark Hospitality, a
company based in Texas that manages fourteen privately owned conference
centers and is looking to expand to university-owned conference
centers. “The open-market mentality toward managing those facilities
does not grow in an academic world.”

Meanwhile, other schools are looking at building conference
facilities both to satisfy their own internal demands for professional
meeting space and to provide the sort of executive training that more
and more corporations are offering these days. The University of
Cincinnati, for example, is building a conference center through which
it intends to market its faculty and their availability for executive
education. Construction on the center is to begin this summer.

“We have an executive training program, but it’s focused fairly
locally,” said Dale McGirr, the university’s vice president for
finance. “We think we have the capacity to make it much more regional,
so it’s taking a platform program that’s there now and trying to expand
it.”

Two companies that have moved into the market of managing
university- and college-owned hotels or conference centers are Marriott
International and the Doubletree Hotels Corporation. Each currently
manages seven, and both companies are looking to expand their
operations.

“It is a major part of our future,” said Roger Conner, a spokesman
for Marriott, noting that the company is in discussions with three
additional university-owned conference centers. “We’re interested in
growing that market.”

Doubletree entered this particular niche of the hospitality
business in 1990 with the Inn at Harvard. The company didn’t expect to
make much money on the deal, said Jennifer Chase, the manager of what
has grown into Doubletree’s collegiate division. However. Linking the
Doubletree name with the prestige of Harvard was an opportunity not to
be missed, she said. The experience convinced Doubletree that it had
discovered a market that could be very good for business.

“Obviously it’s not our major growth vehicle, but it’s something we really enjoy doing,” Chase said.

In a related development, Doubletree has become a target of a
campaign currently being waged by the National Association for the
Advancement of Colored People (NAACP). The organization sent surveys to
sixteen hotel chains in an attempt to measure responsiveness in the
areas of employment, equity and franchise ownership, vendor
relationships, advertising and marketing, and philanthropic giving.
Eight of the chains, including Doubletree, received failing grades
because they refused to provide information. As a result, the NAACP
canceled a planned regional conference at a Doubletree facility.

Although the management companies consider their finances
proprietary and will talk about profit only in general terms, people
familiar with the business say that well-run university- and
college-owned conference facilities can he expected to generate a
profit of 15 to 20 percent.

Roginsky said that bringing in an outside management company is
frequently the key to converting a university hotel or conference
center complex into a profitable enterprise. As many as five
institutions each year are now making the switch, she said.

“Getting a professional management company in is a way for them to
make this a profitable operation as opposed to a financial drain,”
Roginsky said. “I’ve seen these hotel companies turn these conference
centers around.”

Carolyn Elfland, associate vice chancellor for business at the
University of North Carolina at Chapel Hill, provided some perspective
on just how dramatically the fortunes of a university-owned facility
can be reversed under professional management.

Carolina Inn, a hotel that has been owned by the university since
the 1930s, was in dire need of refurbishing when its management was
turned over to Doubletree in 1993. Because the hotel had made a total
of only $500,000 in all the years that the university had run it, there
wasn’t much incentive for the university to pour money into expensive
renovations.

In its first year of involvement, Doubletree nearly doubled the
Carolina Inn’s gross operating profit, according to figures provided by
the company. Plus, the company paid the university about $110,000 per
month for the privilege of running the inn. The university made more
than twice as much money from the inn as it had made in the previous
sixty years — combined — after just one year with Doubletree.

“You get a number of advantages from partnering with a private
hotel company,” said Elfland. “States in general are focused on [the
university’s] stewardship of tax dollars — and in some ways, that is
not consistent with operating a business and being customer oriented. I
don’t think there’s anything wrong with that, but then you can’t he in
the business of running a business.”

COPYRIGHT 1997 Cox, Matthews & Associates



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