Hilton Bets on College Towns With $210 Million Deal
Lodging giant is acquiring Graduate Hotels, a brand with properties near dozens of college campuses
It is acquiring Graduate Hotels, a 10-year old company that owns and operates dozens of hotels in some of the country’s biggest college towns, from Ann Arbor, Mich., and Oxford, Miss., to Chapel Hill, N.C. It also owns hotels in the U.K., including one by Cambridge University.
Hilton Chief Executive Chris Nassetta said college towns have been historically underserved by their current hotels, which he said tend to be older, high-end properties central to campus or more boilerplate, limited-service hotels removed from the action.
Graduate properties tend to be closer to the campuses and strive to offer guests a stay that reflects the community. The chain’s Chapel Hill hotel, for example, boasts a replica of Michael Jordan’s University of North Carolina dorm room as well as a plush, carpeted indoor basketball court.
The Madison, Wis., hotel’s bar, called Camp Trippalindee, is a nod to the 1986 movie “Back to School,” starring Rodney Dangerfield, that was filmed on the University of Wisconsin campus. Keycards at many of the properties are styled as student ID cards for the nearby school.
College sports events, reunions, parents’ weekends and typical university business will help drive demand at the hotels, Nassetta said. He added that the brand is an opportunity to establish an early relationship with college students and build loyalty with parents. Wrapping the brand in Hilton’s rewards system and infrastructure, Nassetta said, will help supercharge its growth.
“While it is definitely a niche within the industry, it’s a very big niche that we think has a huge addressable market that we’re not really covering,” he said.
Nassetta said he thinks Graduate can become a “megabrand” with an opportunity to expand into at least 400 to 500 hotels.
AJ Capital Partners, the Nashville, Tenn.-based property firm selling the Graduate brand, will hold on to the real estate of the 37 hotels it owns or is developing in the portfolio. AJ Capital CEO Ben Weprin said Graduate Hotels benefit from the nostalgia people associate with their college experiences, as well as from demographic factors that have driven growth in their markets.
“These are not just college towns,” he said. “They’re state capitols. They’re hospital systems. They’re life-science markets. Those have grown exponentially around the world.”
College campuses and the surrounding area have in recent years become a hot market for hotel operators, which are seeking new sources of growth in a mature market, according to C. Patrick Scholes, an analyst at investment bank
Truist
. He said booming interest in college sports and other big alumni events such as reunions and homecomings make campus hotels attractive.
“You go to homecoming or something in Alabama, forget it,” Scholes said. “Those are insane room rates.”
Hilton isn’t the only company in the lodging sector to set its eyes on college towns for the next frontier of growth. In 2023, timeshare operator Travel + Leisure struck a deal to help open Sports Illustrated-branded resorts in college towns, starting at the University of Alabama in Tuscaloosa.
“There’s probably not a more passionate lifestyle in America than college sports,” Travel + Leisure CEO Michael Brown told investors in October, a month after inking the Sports Illustrated deal.
Another brand, called Study Hotels, recently opened its fourth property at Johns Hopkins University in Baltimore. The company’s portfolio also includes locations at Yale, the University of Chicago and near the University of Pennsylvania.
The deal is a rare acquisition for Hilton, which, counting the Graduate, will own 23 brands. Hilton created most of those brands from scratch, rather than buying competitors. Nassetta said the company has always been open to deals, but few have met the company’s thresholds.
He was introduced to the Graduate brand years ago while visiting his daughter at the University of Virginia in Charlottesville. Nassetta said he has floated an acquisition of the brand ever since.
Hilton will gain rights to the Graduate brand worldwide, enter into franchise agreements for all existing and signed Graduate hotels and take on the brand’s future development. The transaction is expected to close in the second quarter.
Shares of Hilton are up more than 47% from a year ago at a record high, riding the postpandemic boom in leisure travel and the continuing recovery in business travel and conferences.
Write to Will Feuer at Will.Feuer@wsj.com and Craig Karmin at Craig.Karmin@wsj.com
