Getting resourceful: how administrators can generate alternative sources of revenue
About five years ago, Metropolitan State University, Denver partnered with Sage Hospitality to open a SpringHill Suites by Marriott on the edge of its campus. Serving as the site of the university’s hotel, tourism and events program, the building employs at least 90 students at any given time and brings in industry experts to work as adjunct faculty members.
But while giving students practical, career experience, such as working in the on-site restaurant or learning front desk procedures, was a primary goal of the business arrangement, so was increasing the university’s bottom line.
“We had the clear intention of making money that would flow to the university,” says MSU Denver President Stephen Jordan. “The combined space allowed us to create a for-profit entity that we own totally.”
Because the property offers services not typically found at a SpringHill Suites, including a full-service restaurant and conference facilities, the hotel has “widely exceeded our financial expectations,” Jordan says; and in 2014, it was Sage’s top-performing hotel. The revenue is paying for the debt on the academic space, and this year, the corporation overseeing the hotel turned over $2 million to the university foundation—with half being used for scholarships and the other half being used to further improve the hospitality program.
Shoring up budgets by leveraging partnership opportunities
Colleges and universities have long run businesses, such as bookstores and food services, as a convenience for students and staff members. But with most public institutions no longer able to cover all of their costs through tuition and state funding alone, many have become more intentional about generating additional revenue.
“Institutions have had to be more strategic and entrepreneurial and really creative in identifying new funding streams to really shore up their budgets,” says Tom Harnisch, the director of state relations and policy analysis at the American Association of State Colleges and Universities (AASCU). “They’ve had to be very creative and look to build partnerships with nonprofits and the private sector in order to find ways to not only advance their mission, but that in some cases result in new revenue for the institution.”
Partnerships between universities and hospital corporations have been another vehicle for training future healthcare providers while also attracting more money. In about two years, Hospital Corporation of America (HCA), the largest hospital company in the U.S., will open a hospital in what is known as Orlando’s “Medical City” on land already owned by the University of Central Florida (UCF). The site will serve as a teaching hospital for UCF’s medical school, and when it begins to make a profit, the university will earn 20 percent.
“It definitely generates resources for us, but we also get a teaching hospital for our medical school,” says Daniel Holsenbeck, senior vice president for university relations at UCF. In 2013, UCF President John C. Hitt labeled the institution “America’s partnership university” and has encouraged his leadership team to never say no to a partnership without exploring the possibilities, Holsenbeck says.
In another arrangement and near the same medical city, the U.S. Tennis Association built probably the world’s largest tennis complex and partnered with UCF to move its tennis program there, saving the university from having to build its own facility and creating tremendous recruitment possibilities, Holsenbeck says.
Taking advantage of local industry for external revenue streams
In seeking opportunities to increase revenue, colleges and universities often look at how they can fill a need within local industries. California State University, Northridge, for example, has long received requests from the entertainment industry to use campus facilities for filming. But in 2003, university officials decided they could increase even more revenue through these TV, film and commercial shoots, explains Rick Evans, executive director of The University Corporation, a nonprofit that handles commercial endeavors to benefit the university.
“Growing alternative sources of revenue for the university becomes increasingly important with each passing year,” he says.
“So You Think You Think You Can Dance,” “American Idol”, HBO’s “Silicon Valley,” and “Arrested Development” are just a few of the shows that have used CSUN’s facilities, as long as the filming doesn’t conflict with normal campus activities. Since 2003, business has tripled, Evans says, and revenue this year will top $1.25 million.
“Due to our experience with a wide variety of film projects, we have a pretty good sense of what will and will not work,” Evan says. “CSUN is film friendly and we seek to accommodate as much as we can.”
MSU Denver, where the average age of students is 26, is tapping into that city’s microbrewing industry by partnering with Tivoli Brewing Company. Until the 1960s, Tivoli operated a brewery in what later became the university’s student union. Now named the Tivoli Student Union, the building houses a restaurant and serves as a training facility where students can earn degrees in brewery operations or craft brewing. And in the basement, $3.5 million worth of testing labs are leased out to microbreweries from across the state to refine their recipes.
Partnerships such as these are now a core value in the university’s strategic plan, Jordan says. “We look at what are our competencies, what could this yield for us and what could it yield for the partner,” he says.
‘Stay true to mission’ and focus on retention
While renting out campus facilities is probably the most common way that institutions bring in additional funds, some are even taking the next step. According to the St. Louis Post Dispatch, the University of Missouri-Columbia will make unused dorm rooms available for $120 per night during football season and other campus events, perhaps getting the idea from enterprising students around the country who have tried to make some extra cash by listing their dorm rooms on Airbnb. Many universities lease their parking lots and garages to other organizations, and others, according to University Business magazine, lease roof space for cell towers or antennas.
Some experts, however, encourage university leaders to focus on how they can improve educational opportunities for students before they launch too many non-educational business ventures.
“Our general advice is to stay true to mission and continue to serve students,” says Melanie Ho, the executive director of EAB, formerly the Education Advisory Board.
In addition to expanding virtual courses and degree programs, as Purdue University is doing with its purchase of Kaplan University, these strategies, she says, include boot camps, in which students—many of whom are already working or have families—can complete a course or program in a shorter amount of time. Bringing programs directly to the learners is another successful way for universities to “serve new populations in different ways,” Ho says.
Brown University in Providence, R.I., for example, delivers a complete on-site master’s degree program in biology for Pfizer employees and through an online platform for off-site employees. In another example of delivering instruction well outside of campus boundaries, MSU Denver partnered with the Detroit Institute of Music Education, allowing students in Detroit and Denver to study commercial music performance, songwriting and other aspects of the music business.
“We’re getting people who probably would not have gone to college if it hadn’t been for this program,” Jordan says, adding that the partners are considering adding a third site on the East Coast.
Creating flexible routes for the growing number of students who have some college credit but not a degree can result in added revenue, Ho says. But so can keeping students from dropping out in the first place. Salisbury University in Maryland gained an additional $340,000 in one year by implementing several student success measures, including improving its advising process, creating four-year curriculum guides and expanding the use of “minimesters”—shortened, but intense, courses. Using technology from EAB, which helps institutions predict which students need the most support, Middle Tennessee State University helped 390 additional students remain in school through the spring semester, which resulted in $1.5 million in tuition and fees.
Institutions are also increasingly bringing in additional revenue by contracting with corporations to fill training and education needs in the workforce. Maricopa Corporate College (MCOR), based at Rio Salado College in Tempe, Ariz., contracts with companies, such as Amazon, Marriott and Nissan, and with nonprofit organizations and government agencies, to deliver a wide range of non-credit training programs. Topics covered include leadership training, time management techniques and specific software skills, such as Excel or Outlook. After expenses, the funds generated are used to support the entire Maricopa County Community College District, and often, companies later seek credit-bearing programs for their employees at one of the colleges in the district, says Patricia O’Brien, the director of business development for MCOR.
Providing services to the private sector, O’Brien says, is a sustainable source of revenue in higher education.
“There will always be the need for training and development, as the diverse needs of the business community are always shifting,” she says.
Creating a ‘culture’ that's open to partnerships and new opportunities
Whether it’s forming a partnership with a company to build a joint-use facility or creating a for-profit workforce training program, Jordan says it takes a while to create a “culture” in which faculty members support the idea of partnering with industry executives. He adds that it’s important to recruit higher education leaders who also have experience in the private sector.
Another lesson, he adds, relates to the management of the corporation created to run the SpringHill Suites. Initially his team thought it would be best that the majority of the board members be from the university. Instead, he says, institutions “need the wisdom of people who are really in the business.”
Holsenbeck at UCF recommends that institutions thoroughly investigate the “financial credibility” of any potential partner and remain flexible if state or federal approval or matching support is involved. “You can’t control that process,” he says.
Harnisch with AASCU recommends that officials “really look at what they’re doing and make sure that the institution is protected from a risk management perspective.” He adds that institutions also need to consider who the primary customers will be for products or services sold to the community. If those customers are largely students or their parents, the endeavor could be perceived as just an indirect way to raise tuition and fees.
With the search for new and innovative ways to raise revenue continuing—and with much of those endeavors involving partnerships—AASCU this year is bringing together university presidents to conduct a more thorough, nationwide review of partnerships. The Task Force on University Partnerships is looking at what makes a successful partnership, whether it’s with the private sector, a nonprofit or a governmental entity. The task force will convene throughout the year and issue a report this fall.
Partnerships “are an expanding part of higher education research,” Harnisch says, “because there are such limited funds coming from state government.”