Hilton recently acquired the Graduate Hotel brand, a lifestyle, mid-sized hotel group consisting of 33 properties localized in college towns throughout the U.S. and U.K., for around $210 million. The deal will have Hilton absorbing the current franchise agreements for all open hotels, the current pipeline for future Graduate hotels, along with all licensing and branding for the Graduate brand. Hilton’s acquisition of Graduate adds to its growing portfolio of homegrown lifestyle brands, joining the likes of Curio, Tempo, Motto, and other brands that Hilton has cultivated in the space.
What separates Graduate Hotels from some of these other brands is the emphasis on location. It’s the ties to local colleges and universities, the uniqueness in design and amenities that each location brings to its collegiate clientele, that ensure Graduate stands out from the pack. Which is why I was disappointed to see some opinions on that Graduate’s potential outside the realm of college and university towns. Makarand Mody, a professor of Hospitality Marketing at Boston University’s School of Hospitality Administration, claims in an article for hospitalityinvestor.com that the Graduate brand “doesn’t necessarily have to be associated with the college business. The product really transcends the college town market. As long as Graduate Hotels are located in vibrant social and economic hubs, they can succeed.” I wholeheartedly disagree. Losing any aspect of a brand’s core identity for the sake of growth is a recipe for disaster.
Location, Location, Location
It’s as if people forget that the most important rule in real estate applies to the related aspects of real estate. In the case of the Graduate brand, it’s strength as a brand is directly tied to the strengths of the local markets it’s tied to; the predictable seasonality of its occupancy making staffing and procurement easier, the strong guest relationships that are built over time through family visits and alumni events, and the opportunities for partnerships with the local communities on student engagement and collegiate events.
Growing the Graduate brand outside of the college environment means losing the brand’s core identity and its competitive advantage in other markets. And it doesn’t have to be that way for the brand to still experience robust growth. With only around 30 current locations and thousands of colleges and universities around the world, the Graduate brand has plenty of new markets to enter. Chris Nassetta himself, President and CEO of Hilton Hotels, said the brand has a current addressable market of four to five hundred hotels, a strong pipeline on its own, without even considering other markets that would weaken the brand’s positioning.
Location being a core aspect of a brand, while extremely evident with Graduate, can manifest itself more subtly in brand categories. Luxury and convention hotels find themselves in larger cities, while extended stay brands find success in demand generators that feed into these hotels, like hospitals and vacation spots. But all this is to say that a core aspect of a brand’s identity should not be disregarded for the sake of growth alone.
It’s What’s Inside that Counts
Aside from its locations, Graduate hotels draw strength from their positioning in the “lifestyle” or “boutique” classifications. Those are loaded terms but they generally point to uniqueness in design, amenities, and partnerships that you can’t get anywhere else. Take a quick stroll through the Graduate brand’s website and you’ll see exactly what I mean.
Design
No two Graduate hotels look alike, from the opulence of the Providence location to the nautical theming of the Graduate Annapolis. What this does for guests is immerse them further in the local culture of the area. Whether guests are getting ready for a campus tour or have business at the local college, the designs of these hotels set the tone for a stay that cookie cutter brands just can’t do.
Amenities
Boutique hotels like Graduate generally offer more for guests to do on or off property. From restaurants to spas to unique fitness facilities, guests will find a freshness to each hotel’s offerings that again branded hotels find it tough to compete with. And because each hotel can operate independently from the larger brand, they aren’t bound by the standards that handicap other hotels from being unique and interesting. One hotel might offer bike rentals or afternoon tea, or even a game room.
Partnerships and Events
Boutique hotels cater to a clientele that will generally spend more but also expect a level of service and offerings above and beyond a normal hotel. Graduate satisfies this expectation in a variety of ways. Their partnerships not only with local colleges and universities but also with organizations like the Lebron James Family Foundation and the support of a local artist residency program allows Graduate to attract guests with varied interests and desires.
Graduate could not make the same elements of their brand work outside of the college town environment. These aspects are integral to the brand’s identity and enable the Graduate brand to compete with other boutique brands on their own terms.
What Hilton Brings to the Table, And More
Hilton’s acquisition of the Graduate brand brings much expertise, resources, and access to a small brand with much potential. What might be more interesting are less obvious ways Hilton can support the growth and success of the Graduate brand, while bolstering their own homegrown lifestyle brands in the process.
The Short Term Benefits
What Hilton can bring to the table, without changing the Graduate’s core identity, has to do with access. Hilton has over 190 million Hilton Honors members, who are now incentivized to stay at Graduate properties when traveling to any of their markets through a combination of points and perks. Hilton also has access to additional sources of capital for expansion, and opening up the brand to franchising opportunities could be an expeditious way of expanding the brand in key markets.
The Long Term Plan
However, the more interesting Hilton benefits may be less obvious. Hilton already has a number of partnerships with colleges and universities, both for recruiting students for jobs, co-ops, and internships, and in some cases, hotels operated by students as teaching facilities. It should be obvious that the Graduate brand has a natural avenue to serve as additional recruitment vehicles for students interested in hospitality. Universities that have hospitality programs should be targeted first, as these hotels could also operate as teaching facilities, in addition to jumping off points for jobs and internships. With how important staffing has become to hotels as of late, deepening the relationships with universities and incentivizing them and their students with quality, fulfilling jobs and internships should be paramount to Hilton’s strategy with the Graduate brand.
Ascension Associates Knows Boutique Asset Transitions
We believe that Hilton will have much success with the Graduate brand, and in our own line of work, we see our clients navigate asset transitions of all kinds. Ascension Associates can assist with the big and the small of these types of transitions, from advising on strategies and partnerships that make sense, to executing design direction and tech stack adjustments. We are your partner, and more importantly, your doer in the projects we undertake. Contact us today at clients@ascension-consulting.com, or schedule a free 15 minute consultation here to see how we can assist in your next acquisition.