Why Hilton’s move to enroll Graduate Hotels gets top marks

Earlier this month, Hilton finalized an agreement with Adventurous Journeys Capital Partners (AJ Capital) to acquire Graduate Hotels. The Graduate brand will be incorporated into Hilton’s burgeoning lifestyle portfolio. According to the press release announcing the transaction, Hilton will pay $210 million to acquire all rights to the Graduate brand worldwide, enter into franchise agreements for existing and signed pipeline Graduate Hotels, and become responsible for the brand’s future growth. AJ Capital will remain the owner of the more than 35 operating and pipeline Graduate properties, each of which will be operated under long-term Hilton franchise agreements. Graduate Hotels will be available for booking via Hilton channels later this year and will participate in the Hilton Honors loyalty program.

The Graduate CV

Founded in 2014, Graduate Hotels is a collection of hand-crafted hotels that reside in university towns in the United States and the United Kingdom. Graduate curates its hotels to match the atmosphere of the college campuses by which they exist.

The brand has developed into a strong niche player due to its commitment to a college town strategy. When it started, the founders discovered that many of those markets had very limited hotel product, and almost nothing in the lifestyle or boutique segments.

Furthermore, research was showing that market volatility is low in university towns. John O’Neill, director of Penn State’s Hospitality Real Estate Strategy Group, said his research shows that hotels in university towns have more stable occupancy rates and average daily rates than similarly sized towns, and compared to national averages. “That means,” he says, “that hotel investment in university towns is relatively low risk, all things considered.”

There are a few competitors focusing on university towns, but they are very small compared to Graduate. Study Hotels has four properties and Scholar Hotel Group has eight (including Hyatt and Marriott franchises). Meanwhile,the new Sports Illustrated Resorts concept is designed to be built near universities with strong athletic programs. The first is scheduled to open Tuscaloosa, Ala., late in 2025.

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