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What to consider before signing student housing contracts

As markets begin to reopen to a vastly different demand landscape, our asset management team is working with hotel operators to consider a whole host of new business segments emerging from the COVID-19 crisis. While the analysis of whether or not it makes sense to accommodate nontraditional sources of demand—both from a financial and a risk standpoint—will be unique to each and every hotel, it is clear that hotels are in a position to support a broader need in the marketplace. And in turn, those hotels that proactively seek opportunities from unlikely sources may prove to be the very thing hotels need to begin to ramp up operations with a sense of stability in the short-term.

While there are countless examples to draw upon—from utilizing ballroom space for prepping meals for senior living centers to guestrooms serving as socially distant office spaces—there is one segment that has recently come to the forefront in many markets around the country—colleges and universities.

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Higher educational institutions have a few months to plan for what the fall will look like for students and professors, with many aspiring for an on-campus return. This includes exploring options that will allow for adequate social distancing, both for residential living and for classrooms. While we have not seen the level of interest from colleges in utilizing hotels as high as it is now, this type of relationship has existed in the past, historically related to accommodating displaced students during dorm renovations. So, the good news is we have some lessons learned for those who may be contemplating how and if students and guests may coexist. 

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Based on our experience, and also that of some industry colleagues (including Stacey Nichols, director of commercial properties at Denver International Airport, former general manager with Hyatt Hotels), we have outlined some key operational considerations and negotiating points for hotel owners and operators to consider when exploring opportunities to potentially contract with colleges/universities for student housing:

  • First and foremost, evaluate the economics given demand dynamics in your specific market. These analyses will typically include both a cost assessment and displacement analysis, depending on how quickly demand is likely to return. While it is common that the operator will prepare the analysis, close examination of assumptions is required, both cost and risk, to understand the potential impact to the operation and also to ownership.  
  • Understand how the college/university intends to utilize the room block. Will the hotel serve as overflow housing for returning students or only if excess capacity is needed for isolation on campus? This will be important for establishing room block guidelines and pricing.   

If the decision is made to accept a student contract, consider the following:

  • Restricting utilization to upperclassman.
  • Removing hotel furniture and have the college put in dorm room furniture. The cost of storing hotel furniture should be incorporated into the rate.
  • Providing housekeeping service on a limited basis (if at all) to limit costs. 
  • Preserving the right to physically inspect rooms periodically to be sure there is no damage and address any maintenance issues is critical.
  • Not supplying hotel towels or linens; Students should bring their own just as they would in a typical dorm situation.
  • Not supplying hotel bath or other amenities (e.g. coffee) in the rooms.
  • Keeping all student-use rooms on the same floor(s) or tower, depending on hotel configuration, to allow for separation between students and guests. 
  • Assigning lower floors are preferred to alleviate elevator traffic and nose.
  • Not assigning balcony rooms, which are higher risk for students and limit hotel’s potential for upsell opportunities.
  • Scheduling deep clean of student-use rooms more frequently than normal rooms, given the constant use.
  • Discussing additional space needs and factor that into the price negotiations. Will there be some level of food-and-beverage service needed? Will students need a hospitality/study room on each floor to congregate? What are the parking requirements? Do bike racks need to be added to keep the garage organized? 
  • Determining in advance student access privileges and restrictions. Unless the building will be fully leased for student accommodations, best practices suggest restricting student access to areas such as the pool, gym, business centers and communal lobby spaces so as not to deter from the guest experience. 
  • Requiring a security deposit.
  • Finally, students should sign a contract or pledge regarding hotel expectations and policies established for quiet hours, room standards, responsibility for damage, limits on guests per room, no hotel liability for lost/stolen items, etc. There should be a room walkthrough before move-in and at move-out conducted by a hotel employee and the student to be signed off on.

The decision to accept a student contract will vary by market and hotel, but for those hotels in a unique position to accommodate students, it is worth evaluating the option as a means for securing base business as one possible strategy.  

Larry Trabulsi is EVP of CHMWarnick, a provider of hotel asset management and owner advisory services and VP of the board of directors for the Hospitality Asset Managers Association.

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