An increasingly popular option for hotel operators looking to fill empty rooms and for universities seeking to secure sufficient accommodation whilst longer term projects for university accommodation are ongoing is an arrangement whereby students stay in local hotels. There are however a number of matters to consider for hotel operators when pursuing such arrangement.
The introduction of higher student fees has done little to dampen the demand for university places. Universities who lack sufficient student accommodation risk deferring potential students or losing a competitive edge in the applications process for lack of quality accommodation. Specialist student accommodation developers have emerged to provide studio bedrooms in large-scale developments, either on behalf of specific universities or directly marketed to students, although such accommodation does of course take time and capital to develop. This is where hotel operators can potentially secure a guaranteed income from a relatively long term occupation of rooms in the current tough economic market.
Of course the benefits to hotel operators will need to be balanced with some potential downfalls. Opening up a hotel to students risks a potential loss of reputation if the hotel becomes associated with student accommodation and should the hotel find itself in a position of accommodating badly behaved students. The costs associated with ensuring that the accommodation is fit for student occupation (as discussed below) may also make the relationship only worthwhile if the hotel operator is prepared for a longer term commitment to accommodating students.
The contractual structure of the arrangement should be considered and legal advice sought where appropriate. It is likely that the usual form of student tenancy can be adapted to be signed between the hotel operator and the student tenant. This will cover additional matters such as behavioral procedures but clarity will be required around those matters which are the responsibility of the university as apposed to the hotel operator. The arrangement will not take the format of a landlord and tenant responsibility and therefore will not be protected in any way as a tenancy but represents a commercial agreement between the two parties.
In terms of payment, although it is likely that students will be directly responsible for rental payments to the hotel operator, the operator will require the security of a guaranteed income from the allocation of these rooms for university use, which will need to be negotiated based on a commercial rate. In the event that the actual income received from the students in occupation does not achieve this guaranteed amount, the balance will become due from the university. Alternatively, some hotel owners may demand that a guaranteed payment is made in advance, with rents then being recovered by the university or repaid by the operator to the university on certain dates. The hotel operators are also likely to demand a deposit from each student in advance to cover the event of damage.
The agreement with the university will need to be flexible in order to allow termination of each student tenancy at the end of any academic term or agreed longer date. The university is also likely to want to ensure that it is able to reduce the number of rooms required, by terminating the agreement in part, if there has been a surplus allocation of rooms and the guaranteed payment can be reduced by the university. The hotel operator should also seek to ensure that any agreed termination provision for the benefit of the university is sufficient to ensure that the operator can revert to its usual trade procedures on termination.
Allowing students to stay in hotel rooms may mean that consideration needs to be given to the hotel’s compliance with certain regulatory and statutory obligations of the university. The National Code of Standards for Larger Developments is designed to regulate student accommodation not managed and controlled by educational establishments and establishes a set of standards where in excess of 15 students live in rooms off a central corridor. Although compliance with the standards contained in the code are voluntary, they are likely to be consistent with the requirements of a university when seeking a partner for the commercial relationship.
Any commercial agreement with a hotel operator will therefore need to contain clarity of requirements such as:
- The rooms being fully operational, including the use of telephone, internet and television facilities;
- The standard and safety of any kitchen facilities;
- Adequate facilities including mail delivery and laundry services are provided;
- Adequate health and safety procedures being in place;
- Equality and diversity procedures at the university are followed;
- Marketing and letting responsibilities are complied with; and
- Adequate security measures being in place.
Use of hotel facilities by universities clearly has the potential to be a mutually convenient arrangement providing the university with a short term, flexible solution to finding sufficient accommodation of a guaranteed standard to house any unexpected rise in student numbers, and the hotel operator with a guaranteed income from a relatively long term occupation of rooms in the current economic climate. This mutual benefit of course needs to be balanced with the need to ensure that commercial terms of any agreement accurately reflect the needs of all parties.