Central Florida is one of the country’s most popular tourist destinations, so it makes sense that hospitality enterprises can be counted on to provide a financial boost—even to higher education institutions.
Here at Rollins College in Winter Park, Fla., a $12.5 million gift from the Harold Alfond Foundation helped us build a 112-room inn that meets our need for lodging and conference space and also funds a lasting scholarship endowment. This initiative, costing a total of $30 million, is part of our hybrid approach to the financial challenges facing colleges and universities throughout the country.
The idea for the inn was sparked at a 2008 strategic planning session of our board of trustees. The board discussed the college’s need for a campus hotel that could provide meeting space and accommodations for prospective students, parents, alumni and academic visitors.
And Rollins is just steps away from Winter Park’s picturesque Park Avenue district—a popular shopping and dining destination that presently lacks ample accommodations—creating a viable business opportunity. With this goal in mind, we seized the chance to purchase a 3.3-acre parcel adjacent to campus and in a prime downtown location.
Though we had the ideal location, finding a hotel developer to invest in the property proved more challenging. Despite many responses to our RFP, each of the candidates lacked one key element—funding.
When our plans stalled, we met with a longtime Rollins supporter, the Harold Alfond Foundation, a charitable organization from the founder of the Dexter Shoe Company. Together, we developed a plan to use the foundation’s grant to build a hotel that would generate enough recurring revenue to create a lasting scholarship fund. The foundation heartily supported our request with a $12.5 million gift to develop The Alfond Inn. In a new and different way than ever before, Rollins College was in business.
To pay for the remaining $17.5 million in building expenses, our team used cash reserves in the form of an internal loan that will be paid back at 4.5 percent per year.
And of course, the best part is that The Alfond Inn’s annual net proceeds—expected to reach up to $3 million—will support the education of worthy students. As the college’s premier scholarship program, the permanently endowed Harold Alfond Scholarship Fund will provide tuition, room and board sponsorship for top-notch, deserving students.
Net operating income from the inn will be directed to the fund for the next 25 years or until the endowment principal reaches $50 million, whichever comes later. With high expectations for the hotel’s income, the endowment could easily grow to $75 million in the 25-year period, ensuring the foundation’s gift will truly keep giving.
Room to grow
In addition to generating alternative revenue for our students, the hotel serves as an unconventional marketing tool, helping promote the college’s mission to new audiences. Whether they’re visiting for a weekend, hosting a wedding at the inn’s ballroom, having dinner at our fine dining restaurant or just stopping by the lounge for a nightcap, patrons will know they’re contributing to our students’ education.
And with room to grow—a surface parking lot provides expansion space—we have the opportunity to add 70 to 80 rooms in the coming years and reach even more potential Rollins’ supporters.
With the rising cost of higher education, institutions are finding it increasingly important to expand their support bases and explore alternative funding sources. Besides tuition and fundraising, Rollins has relied on its $100 million commercial real estate portfolio.
In fact, the $9.9 million land purchase that made the Alfond Inn possible wasn’t unusual for the institution, which earns about $5.5 million each year from rent of commercial and retail space it owns near campus. When strategic properties adjacent to campus become available, the school pays cash for them. The property supports operating costs in the short term and enables long-term expansion as enrollment grows.
As a liberal arts college, Rollins expects creative problem solving and innovation from our students. In the competitive world of higher education, we must demonstrate the same. The Alfond Inn is the latest example of doing just that.
Jeffrey G. Eisenbarth is vice president for business and finance as well as treasurer for Rollins College.