Luxury Student Housing’s Heyday Has Passed
by Sarah Steimer, from The American Marketing Association
Article content is provided by HigherEdJobs.Colleges raced to update dorms and add exciting amenities in the early 2000s, but what dazzled millennials is now out of touch with Gen Z.
"The millennials are coming."
So rang the rallying cry of everyone working in higher education in the early 2000s. This enormous generation would need degrees, not to mention a place to rest between classes, jobs and socializing. The schools responded, spending large sums of money on residential housing. Investment peaked in 2010 at $12.94 million spent on students' residences and recreation buildings.
Colleges weren't the only organizations getting in on the student boom. Private companies also jumped in where schools were unable to keep up with demand. Some companies partnered with schools for on-campus housing while others built nearby. The competition rose as buildings went up, chock-full of tanning beds, pools and air hockey tables.
This so-called "amenities arms race" in higher education is well-documented, with some people championing its improvements to old, soulless dorms even as critics argue the luxuries overshadow the academics.
The necessity for more room certainly existed as the millennial generation entered college. Millennials are the most likely employees in American history to have a bachelor's degree or higher, according to Pew Research Center (40% of employed millennials have at least a four-year degree). This generation, however, is nearly done with college, and the next is already proving to be much different -- quite possibly to the detriment of luxury student housing.
The Student Housing Boom
Building new student housing, both on campus and off, wasn't just about keeping pace with increasing high school graduates. It was also about keeping up with the Joneses. According to Kelly Ruoff, partner and chief creative officer at Ologie, the average student goes on about seven college campus visits. These tours used to be the litmus test for schools to determine a student's intent to attend, but now they're used by students and families to weigh their options.
"There's always going to be a school with a much better housing option, but you don't want to be the one who has the worst," Ruoff says. "Knowing that it's competitive, [prospective students] are going on these tours and seeing a lot of the same thing. [Schools] need to have housing that holds up in the same way you see schools in an arms race with their athletic facilities, too. You've got to keep pace with your competitors."
Sometimes upscale housing is just for show, she says. A prospective student may never live in the luxury dorm, work out at the high-end gym or attend a single game at the state-of-the-art stadium, but these amenities can attract them. Ruoff says these updated buildings and amenities can give the impression that the university is on trend and makes the overall package more appealing.
Despite the effort to appeal to students and families with a little flash and pizazz on campus, there's no proof that the buildings are able to influence students. Kevin McClure, assistant professor of higher education at the University of North Carolina at Wilmington, who studies campus housing, says there isn't good data to suggest housing is a determining factor in choosing a school, at least not compared to familial influence and location.
Some luxury accommodations were built out of necessity. There are states with policies that prevent colleges from using state money to build self-support structures, which would include residence or dining halls. In other cases, capital funds from the state may be restricted or shrinking. Thus, the only way for some schools to afford new or upgraded residence buildings is to partner with a private company. In turn, these companies may choose luxury models because their investors want to ensure they're getting a return on their money.
A 2013 working paper published by The National Bureau of Economic Research confirmed students are willing to pay for amenities. It also reported that colleges respond to this preference by increasing their spend on amenities. But McClure's research hasn't shown a direct correlation between amenities and student interest in a school.
Although these partnerships could save institutions money, it's impossible to market the properties as amenities-rich and fiscally responsible. According to McClure, there has been no great evidence of the savings realized by schools trickling down to students.
"Most of what I've seen suggests the opposite," McClure says. "Because of the structure of public-private partnerships ... students are signing leases and ... paying closer to what we might expect the market rate for an apartment to be. They can be more expensive than what students would pay for a traditional residence hall."
Think of it this way: Improving a restaurant's aesthetic or adding more booths doesn't change the number of consumers looking for a meal, especially if the restaurant has to increase the price of a hamburger.
In the effort to keep up and even outdo their competitors, schools may have overshot their goals. "2016 Benchmarks, Best Practices and Trends," a report from higher-education construction consulting firm Sightlines, found campus enrollment flattened between 2013 and 2015, with evidence suggesting continued leveling -- or greater decline -- into the 2020s. Many campuses, the report found, are still operating on pre-2013 enrollment projections, building new construction and outpacing enrollment with vacancies.
Indiana University of Pennsylvania is one school that made a big bet on housing that failed to pay off. The school spent $270 million to replace all of its student housing on campus with apartment-style suites. As The Atlantic reported, its undergraduate enrollment has dropped 17% to roughly 10,000 students since 2010.
The New College Student
The first point to realize about today's incoming college class is quantitative: There are fewer students graduating high school. The Western Interstate Commission for Higher Education projected a decade of stagnation from 2013 to 2023 that places the average graduating class size below where it was in 2013. This year's high school graduating class will drop 2.3%, or 81,000 students, ending a 15-year period of consistent increases.
There are fewer students to fill the luxury dorms, and those arriving at colleges may not even be interested in such spaces.
"The things [Gen Z] values are experiences, creativity, being connected to lots of different people, and they're frugal," Ruoff says. "These high-end luxury offerings don't allow for that. Five years ago, millennials may have wanted these items; Gen Z does not. As far as we can tell, that's only going to increase."
Today's college applicants document the things they do, not the things they have, she says. This flies directly in the face of an amenities-rich campus or housing environment. For example, college students are priding themselves on their before-and-after shots, taking sparse, white rooms and turning them into places that reflect their personalities. This self-expression is celebrated on social media (try an Instagram search for #dormdecor or #dormgoals) and websites such as BuzzFeed and Apartment Therapy.
Gen Z is showing an affinity for old dorms with opportunity for personalization, Ruoff says. "There's a lot of pride in creating these rooms that don't look anything like an old dorm room. It speaks to a lot of what we see happening even in popular TV shows and the housing market. It's a lot of makeovers."
Another defining factor for Gen Z may be their frugality. The cost of college continues to climb, increasing 2.4% on average for in-state students enrolled full-time at public four-year colleges and universities from the 2015-16 school year to the 2016-17 session.
"For both the parent and the student, cost is always one of the first things they're looking for," Ruoff says. "The costs continue to go up, and these luxury apartments add to that."
Luxury housing can also have a negative impact on student retention. In a paper for the Journal of Student Financial Aid, McClure and his colleagues report that some students feel there's a bait and switch happening at schools. They're lured in by sparkling new facilities, only to learn those facilities are financially out of reach. It can taint the student's relationship with the school.
"They are in the presence of these wonderful amenities and shops and restaurants, but once they're here, the money has a way of going really quickly," McClure says. "They must make some hard choices, and for some that means working more, which is not necessarily good for their academics. Sometimes it means they go into credit card debt. When you're 18 years old and you're doing a campus tour, it's wonderful that you have a brand-new residence hall and dining hall, but once you're there paying for it, it's a very different set of considerations."
Some schools are responding to the need for cheaper options. This summer the Atlantic reported that Georgia State University, which built one of the country's most expensive student-housing projects, discovered that a student was 12% less likely to graduate for every $5,000 in unmet financial need. In response to this pricing concern, the school built a simple and smaller dorm. This cheaper, scaled-down option has filled up faster than other campus housing since the day it opened.
McClure says the trend is also a reflection of the fact that luxury accommodations are less conducive than traditional housing to community and relationship building, a core tenant of the college experience.
"The trend that we saw over the past decade, where developers try to one-up each other with better or more amenities, is coming to an end," says Benjamin Modleski, COO of education-markets real estate firm Core Spaces. "But I'm not convinced it's because of decreased enrollments or the increased cost of education. We see now in our industry the new shift for developers to right-size amenities and to put a focus on design."
Shifting How Campus Housing is Marketed
If creativity and frugality are the new college student passion points -- and if schools have seen success in offering stripped-down dorms -- it may be in a college's best interest to feature how students transformed these blank canvases.
The most obvious channel for promotion is social media, which some student housing departments are embracing as part of their outreach efforts. Not only are Facebook, Instagram, YouTube and Twitter a great way to alert students to events and other pertinent notifications, it's also a way to highlight campus life to prospective students. For example, University Housing at the University of Georgia has a YouTube channel that features tours and contests of dorms that "showcase who you are." The housing department's Instagram page incorporates hashtags, such as #homeiswherethearchis, that students use as well. UGA's housing department also gave a few students the opportunity to serve as brand ambassadors by way of creating dorm vlogs.
"Students are more likely to trust fellow students about campus living, versus communication from the university," Ruoff says.
Social campaigns are also an opportunity to retire traditional dorm and campus photos, especially if Gen Z students are more interested in experiences. Ruoff says schools need to focus on showing the social side of campus living, not just where students lay their heads at night. She says the schools that accurately portray where students spend their time are the ones connecting with their audience and being honest about the experience.
"[Schools] feel like they have to make sure to show the beautiful brick building with ivy on it, or the traditional archway and a very technical lab," Ruoff says. "They're not necessarily showing the makerspaces or the lounge spots or people just authentically relaxing in them."
Schools have a competitive advantage in showing the proximity of campus housing to classes and their learning communities. McClure's research found the upper hand for all on-campus housing came via live-in learning programs, providing residence assistance and extracurricular programs, and course-corrected strategies are reflecting that. It might also be in a school's best interest to promote some of its other student life offerings, such as food. Ruoff says dining halls are becoming more of a selling point than dorms, with Gen Z spending the majority of their allowance on food and 58% willing to pay more for organic and natural products. She says admissions counselors hear students and families ask about food more often than housing.
"Selecting the right school is about … the feel," Ruoff says. "Does this feel like me? Does this feel like who I want to be in the future? Does this feel like the people I want to be around? A checklist of amenities isn't going to tell you that. They want flexibility and options."
The sweet spot in student housing may be showcasing a variety of price points, amenities or academic and social opportunities. Rather than finding the Goldilocks mid-point, it may be about showing the variety (and creativity) of all three bears.