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Student housing owners are embracing a strategy that hospitality companies have implemented successfully for years: operating multiple properties in a single market to appeal to more customers.

Consider Hilton Worldwide: The company often operates several properties under various brands, also known as flags, to attract a wide range of guests. It segments its customers by price point and the type of travel, business or personal.

Hilton’s Homewood Suites brand, for example, appeals to business travelers who spend several nights or weeks on the road. In contrast, its Hilton-flagged properties appeal to more upscale travelers, both business and leisure, who are looking for on-site amenities such as a restaurant.

In the student housing industry, a number of owners are building portfolios that will appeal to a wide range of residents too. They’re differentiating their properties by design and lease rates, as well as academic standing (underclassmen versus upperclassmen and graduate students).

“The idea of product differentiation is fairly common across many real estate sectors, hospitality in particular, and, now, student housing companies are doing it,” says Miles Orth, executive vice president and COO at Philadelphia-based Campus Apartments. “There are a number of markets where it makes a lot of sense.”

Expectations Vary Among Students
Like hospitality companies before them, student housing owners have recognized that not all their customers are the same. Their residents certainly have one thing in common, however—they’re all students. But beyond that, each one has different priorities and expectations, Orth notes.

Those priorities and expectations could be as simple as having a private bathroom or a resort-style pool. Student housing owners that operate a property without such features may have trouble attracting residents who want them.

That’s why it’s important to have multiple properties to meet students’ needs, Orth contends. Campus Apartments operates several properties near the University of Arizona, Central Florida University, and the University of Pennsylvania.

For owners, it comes down to casting the widest net to sustain occupancy and rental- rate growth, according to Bill Bayless, CEO of Austin, Texas–based American Campus Communities(ACC). “We’ve seen a lot of development in the student housing sector, and too many new developers are focused on providing product at the very highest price point,” he notes. “What frequently happens is that high-end product gets overbuilt and has difficulty sustaining long-term rental-rates growth.”

Bayless says ACC recognizes that different residents have different needs, particularly when it comes to budgets. “In a number of markets, we have an array of properties at different price points,” he says.

Student Class Matters
Beyond price, student housing owners are seeking product differentiation via lifestyle options, as well. Charlotte, N.C.–based Campus Crest recently acquired Copper Beech Townhome Communities, the fifth-largest student housing operator in the nation. The Copper Beech product is significantly different from Campus Crest’s core product, known as The Grove.

While The Grove properties offer traditional apartment floor plans and target students in their sophomore to junior years, Copper Beech properties offer large, townhome-style units that appeal to seniors and graduate students who desire a more “residential” experience, says Ted W. Rollins, co-founder, co-chairman, and CEO of Campus Crest.

Rollins says Copper Beech’s high-quality, well-located townhome portfolio complements Campus Crest’s existing portfolio and prototypical Grove product. Moreover, Copper Beech gives the REIT another brand to develop.

“Our five-year strategic plan includes multiple brands to give us access to different subsectors of the student population,” Rollins explains.

The Copper Beech acquisition adds 35 properties and approximately 16,645 beds to the Campus Crest portfolio. With the acquisition, the company has The Grove and Copper Beech properties in several markets, including Auburn, Ala.; Statesboro, Ga.; State College, Pa.; and San Marcos, Texas.

There are some downsides to this product diversification strategy, of course. The old adage “Don’t put all your eggs in one basket” certainly applies, since owning and operating multiple properties in one market makes you vulnerable to market conditions. If the market weakens, your properties likely won’t perform well, says Judd Bobilin, a partner with Chance Partners, an Atlanta-based student housing developer.

“If you’re too focused on a singular market or a single group within that market, you’ll be very sensitive to that supply,” Bobilin warns.