The term “budget-conscious college student” might seem like an oxymoron, but nowadays it’s not. Today’s undergrads are more conscious of expenses than their predecessors. They’re focused on value, especially when it comes to housing. That means student housing owners and operators must offer more services, more amenities—and more concessions—to attract and retain residents.
“Many college students grew up and lived through the Great Recession with their parents, and that turned them into more cost-conscious consumers,” says Scott Duckett, COO of Austin, Texas–based Campus Advantage.
At the height of the recession, the students entering college today were just freshmen in high school. As teenagers, they probably overheard or participated in conversations at home regarding money. Perhaps a parent was laid off or they were upside down on the mortgage.
“It’s not just about having less money,” Duckett explains. “They’re thinking differently about how they’re spending the money they have. They probably felt the recession at home, whether it was through their family or just an overall awareness. It’s a culture change.”
Debt on the Brain
Because of having experienced the Great Recession firsthand, students today are more concerned about the amount of debt they’ll be burdened with after they graduate. Although some students are lucky enough to have parents who pay for their education, a large majority must take out loans to pay for college. As a result, they’re being more mindful of their budgets.
Ted W. Rollins, co-founder, co-chairman, and CEO of Charlotte, N.C.–based Campus Crest, agrees. In fact, he contends that the focus on value begins with the choice of college, which ties directly into the REIT’s strategic plan to invest in markets with nonflagship state schools.
“Consistent increases in tuition have had an impact on housing,” notes Miles Orth, executive vice president and COO at Philadelphia-based Campus Apartments. “[Students are] looking for scholarships to cover their tuition and ways to minimize their housing costs. They’re looking for the best value they can find. That doesn’t mean they’re looking for the cheapest property, but value is important to them.”
“Anecdotally, we’re seeing that students are more price sensitive, and our data points suggest the same thing,” Orth says. “We’re not seeing the same level of rental increases on a year-over-year basis.”
Orth says Campus Apartments is seeing rental increases of 1.5 percent to 2 percent, compared with 2.5 percent to 4 percent, over the past several years. “There are ways for us to offer incentives and improve amenities to get additional rent growth,” he adds.
While parents are concerned about housing expenses, students are taking the lead when it comes to research and comparison shopping for their housing, observers note.
“We’re seeing more students being more informed consumers in making their housing choices,” Duckett says. “They’re doing their homework and comparing rents and all the costs of living at a property.”
As a result, Duckett says, Campus Advantage has shifted its strategy regarding concessions. “A few years ago, we’d give away an iPad to entice students to sign leases,” he notes. “Now, they’re more focused on the true cost. They’re not so easily turned by a shiny toy.”
Instead of giving away an iPad, Campus Advantage will offer Visa gift cards or a reduction in rent. Duckett says 90 percent of new residents choose the rent reduction instead of the gift card.
Technology’s Increasing Importance
In the search for value, not surprisingly, technology plays a big role for housing-seeking students. “Students have become much more sophisticated in analyzing their housing options, in part because technology makes it so easy,” notes Bill Bayless, CEO of Austin, Texas–based American Campus Communities (ACC). “They can do comparisons online and use social media.”
Students and their parents are still willing to pay for proximity to campus, according to Bayless. In fact, in the hierarchy of value, proximity ranks highest. Unit plans and amenities are next on the list, followed by customer service.
“Student housing is being modernized, and better operators are entering the space, both of which raise the bar for what students expect,” Bayless notes.
Chance Partners, for example, has invested in technology to provide more value to its residents. Judd Bobilin, a partner with Chance, an Atlanta-based student housing developer, says college students view bandwidth as a necessity. Therefore, the properties with the greatest bandwidth are more attractive. At the company’s newest project, Catalyst, near Florida State University in Tallahassee, Chance has installed fiber going to the units.
“It’s a marketing decision, definitely,” Bobilin says. “Millennials use so much more bandwidth, and it’s a significant factor for them when they’re making a housing decision. We believe having fiber going to the unit gives us the best positioning in the marketplace and allows us to differentiate.”
Campus Advantage, meanwhile, is particularly focused on service as a way to create additional value for its residents, as well as for parents. For example, the company provides care packages and concierge service during final exams.
“We’re investing in people to provide a high level of service,” Duckett says. “We believe service helps us achieve an industry milestone for retention. Forty-six percent of our residents stay with us, versus 30 to 35 percent, on average, for the industry.”
As a result, communicating the value proposition is more important than ever, Duckett contends. Campus Advantage has created so-called “value charts” that illustrate a property’s amenities and benefits and assign a dollar value to each.
For example, the company offers business centers with free printing, an amenity it lists on the value chart with the corresponding dollar amount.
“Students are willing to pay more for functional and practical amenities than flashy amenities,” Duckett notes.