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Boosting the Bottom Line

Auxiliary services as revenue generators and resource savers
University Business, Jan 2012
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As the name reveals, auxiliary services will never be directly related to the core mission of colleges and universities. But as ever-tightening resources have become the reality for institutions, the revenue-generating possibilities for these departments have become more important than ever.

By definition, auxiliary service departments provide nonacademic support services to their campus communities. What that really means is that they help colleges and universities leverage existing resources—from bookstores, residence halls, and conference centers to parking lots, transportation, and technology, as well as faculty and staff—for everyone’s benefit. By utilizing campus assets more effectively, at greater capacity, auxiliary service departments generate incremental income that help to fund the university’s infrastructure and/or reduce fixed and variable costs.

Providing Flexibility for Students

Belmont University, near Nashville, Tenn., has students like those found nearly everywhere else, in that when it comes to flexibility, they want as much as possible—especially with respect to meal plans. Yet, parents and administrators, on the other hand, mainly want to be sure students are eating healthy meals.
The compromise has been that Belmont freshmen are required to buy one of three meal plans offered: 20, 16 or 14 meals per week. Older students, however, can choose to purchase any of those three plans or a 10, 8 or 5 meal-per-week plan, explains Kyle Grover, Sodexo’s general manager of the school’s food service program. More than one-third of the university’s 6,500 students are on some form of a meal plan.

Since like most institutions, Belmont pays its food service contractor (in this case Sodexo) a portion of the money received from students for food services, and retains a portion to pay for its operating costs, the more students who buy some form of a meal plan, the better the financial situation is for both Belmont and Sodexo.

One relatively new component to Belmont’s meal program is FlexMoney, which is called Bruin Bucks on campus. FlexMoney is a credit that students buy—$1 equals one Bruin Buck—that can be spent outside of the residence hall cafeterias at one of the campus cafés and snack bars, or off-campus, at one of the local restaurants.

For the last five years that Bruin Bucks were offered, only two off-campus vendors participated: Papa John’s pizza and Smoothie King smoothies. While the program was a welcome addition to the campus food service offerings, students asked for more options—and more flexibility.
In response, Grover and his team, including Brandy Miley, marketing manager, along with Don Purdy of Belmont’s auxiliary services department, began working to sign up new off-campus vendors. Belmont students now have eight vendors and restaurants to choose from.

The benefits of expanding the FlexMoney program are three-fold, explains Grover.

First, students have more options, as requested. Second, area restaurants that participate are given access to a captive audience, of sorts, who have the potential to dramatically increase restaurant revenue. And third, since Belmont negotiates a percentage of sales as payment from restaurants for being included on the designated list of vendors, “FlexMoney generates funds for the university,” says Grover. More importantly, he says, “It’s a new, better way to deliver food to students,” but that diversity in food delivery continues to provide incremental revenue, even when students are not eating in the campus dining halls.

The plan is certainly working, as Sodexo has helped increase meal plan sales by $500,000 in the past four years.

Adding Revenue

The more revenue an auxiliary service department can pump back into its own operations, the lower the financial impact that offering those services has on the campus community. Keeping parking costs from escalating at the University of Virginia has been the primary goal of the Parking and Transportation department, overseen by Director Rebecca White, a certified administrator of public parking.

The Parking and Transportation department is self-sufficient, explains White, meaning that U.Va. is not regularly burdened with funding requests to help maintain and repair the university’s parking lots and roads; the department generates funds to cover those costs.

Historically, it has done so mainly through parking permit fees, which are paid by faculty, staff, and students who regularly need to be on campus. But while operating costs have risen in the last several years, says White, Parking and Transportation has managed to “hold permit parking fees steady,” mainly by creating new revenue streams.

“We recognized that we had to diversify where our money was coming from,” says White, explaining that the department did not want to keep asking faculty, staff, and students to pay more each year for the right to park on campus; the cost was getting prohibitive. “We knew we couldn’t keep going back to our [permit holders] with fee increases,” she says. So White and her team brainstormed additional ways to generate income from other people who visited the Charlottesville campus.

The first such initiative was selling parking spaces for special events, such as football games and concerts—even bull riding competitions. Members of the public attending a special event on campus are now charged a fee to park in U.Va.’s parking lots for a couple of hours, thereby helping to pay the $800,000 per year required just to maintain the 10,000 surface parking spaces (which doesn’t include the $500,000 per year to maintain the 7,700 structured parking spaces).

Another revenue stream that has added significant funds has been installing additional parking meters on campus. “We’re constantly looking for activity, to identify where to add new meters,” says White. Each parking meter generates between $4 and $10-a-day when placed in high turnover areas, and meters are used by individuals who need to be on campus short-term, such as to stop and turn in a paper. They are priced and placed for use for up to two hours.

‘We knew we couldn’t keep going back to our [permit holders] with fee increases.’ —Rebecca White, University of Virginia

For folks who need to park on campus several times during the school year, but not enough to warrant paying $150 to $1,020 for a permanent parking spot, U.Va. has introduced a new occasional parker permit. This package offers 10 one-day permits for as little as $10, which owners can use as needed. “We found that people want flexibility,” says White, and the occasional parker permits provide exactly that—flexibility where and when they can be used.

White’s department also looked at when existing assets were underutilized, which helped spot opportunities for additional revenue generation. Since parking lots are underutilized by the campus community during holiday and summer breaks, the university offered to lease some of those spaces to a nearby shopping center once the college closes in December. It was a perfect fit—the campus had parking spaces sitting idle, exactly when the shopping mall was in need of more. White explains that since the spaces are a little remote, the mall asks its employees to park there, rather than direct customers off-site, but in doing so, dozens of spots near the stores open up.

Likewise, during the school year there are frequently times when the university’s buses are not in operation. Rather than having them sit idle, too, Parking and Transportation offers them as charter buses to local organizations in need of group transportation for a few hours.

Even empty space on elevators inside parking garages, inside bus shelters, and inside the buses themselves is sold to advertisers for added income.

Generating revenue from a diverse group of profit centers helps reduce the need to rely on parking permit revenue to cover the department’s costs, while still providing parking in 11 garages and 100 lots, and 60,000 hours of fixed-route bus service to parking areas, points on campus, and to student neighborhoods. For the 2011-2012 academic year, U.Va.’s Parking and Transportation revenue and internal recoveries will increase by 6.4 percent, to $13 million.

Increasing Existing Assets' Productivity

Texas Christian University in Fort Worth, Texas, generates approximately 70 percent of the annual Conference Services revenue during the eight weeks of summer, from June 1 to July 31, says conference services manager Flo Hill. During that time, the residence halls are vacant and university buildings are lacking activity. So Hill’s department works to fill them up, generating incremental revenue and providing staff and student jobs. But the summer youth camps do more than generate revenue. Texas Christian University residence halls generate incremental revenue and provide staff and student jobs when rented out for summer activities. They also help make TCU top of mind among high school students who spend time on campus. In 2011, conference services managed 125 events in June and July.

Activities held on campus during the summer range from high school dances to charity benefits, as well as sports camps, educational camps, music camps, and continuing education programs for teachers. While most are held in the three-year-old Brown-Lupton University Union, organizations can also have use of sports fields and the recreation center, for example, or breakout rooms within the union, as needed. The only requirement is that the events must be educational or open to the community, explains Hill. Corporate retreats or private meetings are not permitted, although events such as high school graduations, for example, are welcome. TCU hosted a total of 11 high school graduations during the last two weeks in May, even before its busy season heated up.

According to Hill, the net revenue generated from conference services’ business is approximately $500,000, before university overhead expenses are deducted. But Hill is not content with that figure. One ongoing tactic is studying larger universities as role models and applying what they’ve done at TCU. As Hill notes, “We’re always coming up with new ways to generate revenue.”