Turning hotel into student housing? It's an 'evolution' of downtown Rochester
DoubleTree by Hilton owner Andy Chafoulias described the decision to transform the longtime downtown Rochester hotel into freshmen housing for University of Minnesota Rochester students as a “difficult one."
ROCHESTER — DoubleTree by Hilton owner Andy Chafoulias described the decision to transform the longtime downtown Rochester hotel into freshmen student housing as a “difficult one,” in the wake of the University of Minnesota’s approval of the plan this week.
“The university meant a lot to my father (Gus Chafoulias), and I know the vibrancy of downtown Rochester is elevated by the growing presence of UMR students. This was a difficult decision,” wrote Chafoulias in a statement following an approval vote by the U of M Regents.
The university will lease nine floors of the 34-year-old DoubleTree Hotel at 150 South Broadway to adapt the about 200 rooms to provide 400 freshman student housing beds as well as gathering, dining and recreational space. Upperclass UMR students will continue to be housed in downtown apartments in 318 Commons and Residence at Discovery Square.
The university is leasing floors 3 to 11 for $3.06 million annually for 12 years with the gross rent increasing 1.75% a year. The deal includes the university paying a pro rata share of real estate taxes and utilities, which is estimated at $1.01 million for the first year.
The hotel, which is managed by Chafoulias’ Avra Hospitality, would be required to make an estimated $7.63 million in renovations “to convert it from its current use as a hotel into a student housing and dining facility with ancillary recreational space.”
Avra Corporate Director of PR and Marketing Michelle Milde said it has not yet been determined when the construction will begin or when the property will stop accepting hotel guests. The lease starts in August 2023 — not this fall, as was previously reported — and the university anticipates using the property for the 2023 fall semester.
Under the agreement, Titan would provide "a full-service dining program for three meals a day, seven days a week during the academic year.” That is an aspect of the deal that UMR Chancellor Lori Carrell said is very important to students, who currently struggle with the cost of meals in downtown Rochester.
Pescara restaurant and Café Steam, two private businesses that lease space in the DoubleTree hotel, will remain open throughout the construction and after the university takes over, added Milde.
This represents a significant change for downtown Rochester, which has added many new hotels in recent years as the city promotes the Destination Medical Center initiative to bring more patients to Mayo Clinic. Rochester is estimated to have more than 5,800 hotel rooms, with about 2,100 of those being in downtown.
Hospitality, which is Rochester’s second largest industry, is still recovering from the impact of the COVID-19 pandemic with numbers running 20% below the 2019 averages.
In pre-pandemic June 8, 2019, Rochester’s hotels reported an average occupancy rate of 68.1% with an average revenue per available room of $79.98, according to the hospitality data firm STR.
STR reported the current Rochester hotel occupancy rate, as of June 6, 2022, is an average of 53.9%. The current average RevPAR is $63.51.
In the announcement of the final university approval, Chafoulias stated that the hotel has been doing well.
“DoubleTree is not being redeveloped due to a lack of success, but instead, due to the outweighing benefits of the revitalization of downtown and the positive impact that the new facility will bring to retailers and dining establishments,” wrote Chafoulias of the hotel his father built in 1984. “DoubleTree has been an award-winning and well performing hotel in Rochester for years, it is emotional yet exciting to see the building undergo this transition.”
Chafoulias also owns the nearby Hilton Rochester luxury hotel as well as the Hilton Garden Inn hotel, so guests who have stayed at the DoubleTree could be shifted to those properties.
Holly Masek, executive director of the Rochester Downtown Alliance, commented that she has seen many hotels in Boston be converted to student housing, so this is not too unusual. However, she was a little surprised that a hotel that is so close to the Mayo Civic Center would choose such a transition.
“It is a really interesting evolution for downtown,” she said. “I think it is exciting to see the university doubling down on downtown.”
The city has been promoting the idea of downtown living in recent years to attract more residents to the area. Masek acknowledged that bringing more college students downtown only partially checks that box.
“A college student is not exactly the same thing as an adult resident,” she said. “I think college students will bring a bunch of creativity and vibrancy to downtown.”
This surge in university activity is a change from the push for more hospitality - hotels and restaurants - in downtown Rochester as part of the Destination Medical Center initiative and the drive to provide more amenities to Mayo Clinic visitors.
Destination Medical Center Economic Development Agency Executive Director Patrick Seeb said this week that his organization supports this plan.
“While DMC has not been involved with this initiative, we are supportive of UMR’s efforts to grow consistent with their vision. The lack of student housing has been a stopping point for UMR’s continued success in developing tomorrow’s workforce,’ stated Seeb. “Having students in the downtown area will add to the growth, vitality, and energy in the area.”
It is unclear how the DoubleTree freshman housing center fits into UMR’s overall Rochester campus plans. The university, in conjunction with the city and the Destination Medical Center initiative have previously designated a 10-acre area between South Broadway and First Avenue Southwest as the future home for a UMR campus.
The university has spent millions of dollars purchasing and demolishing buildings in that area since 2009. The most recent move was the $770,000 purchase of the small former Running Room building and land in May.
UMR is scheduled to have its “comprehensive campus plan,” reviewed and updated by the university regents in 2023.
Exploration of future facilities and partnerships for the university will continue, as the current housing project with Titan Development will allow UMR to continue its growth,” according to the joint UMR/Titan Development statement released Friday.
Jeff Kiger tracks business action in Rochester and southeastern Minnesota every day in "Heard on the Street." Send tips to firstname.lastname@example.org or via Twitter to @whereskiger . You can call him at 507-285-7798.