Working group examining hotel operations, strategic opportunities

Study is part of ongoing focus on access, affordability and University strategic priorities

UNIVERSITY PARK, Pa. — Penn State, like all of U.S. higher education, is facing a period of disruptive change and competition that challenges Universities to continue to be strategic about stewardship of limited resources. Since 2018, 11 working groups at Penn State have been examining how various services and resources, including the University’s physical assets, align with Penn State’s core functions of teaching, research and service. Known as the Resource Optimization Initiative, the process is a multi-year initiative to study the affordability of a Penn State degree and to examine new ways to support strategic priorities such as One Penn State 2025, while controlling costs and enhancing revenue.

The 11 groups — which are examining areas such as procurement, health and fringe benefits, online learning, information technology, and more — are each proceeding on separate timelines, according to Sara Thorndike, senior vice president for finance and business/treasurer. The groups are engaged in a review of major cost and revenue drivers; looking at new or underused sources of revenue and cost control opportunities; and benchmarking best practices.

During a recent conference session of the Penn State Board of Trustees, Thorndike and John Papazoglou, associate vice president for Auxiliary and Business Services, provided an update on the ongoing work of the physical asset optimization group and its efforts to examine potential efficiencies that could be realized in hotel operations at University Park.

In the coming months, with support from Penn State leadership and the Board of Trustees, the University will begin a process to examine operational options for The Penn Stater Hotel and Conference Center and The Nittany Lion Inn, including their strategic, long-term value and benefits to the University community, Thorndike explained.

“The goal of this effort is to look at how continued investments into the operations of the hotels may or may not align with the University’s core teaching, research and service mission. This analysis is driven by the fiscal responsibility of the University to explore all areas of operations in support of mission-critical priorities that will best serve our students,” Thorndike said. “With the recent impact of COVID on the University, optimizing resources and identifying efficiencies and savings is even more critical to support our strategic priority of access and affordability.”

To assist in this initiative, the University has engaged a consultant, Rieth Jones Advisors (RJA), to compare and contrast possible options that may be available, including keeping and renovating the properties; divesting and ground leasing them; or variations on these options. This process will continue over the coming months with an expected goal to make a recommendation about either or both hotels to the Board of Trustees by mid-2022.

“No decision has been made. Going through this exercise does not mean the University has determined to change hotel operations or move forward with any specific option,” Papazoglou said. “Penn State is analyzing all aspects as well as the potential impact any decision may have on our community, including hotel employees, faculty and staff who use the facilities; students who participate in experiential learning on site; and alumni and guests who patronize both facilities.”

The examination of the two hotels is taking into account ongoing operational costs — including a sizable and costly maintenance backlog — the need for renovations to continuously meet guest expectations and industry standards, along with growth and intense competition in the local and regional hotel market.

“The University’s goal is to make a decision that will ultimately benefit our community in the long-term and that aligns with our priority to keep a Penn State education affordable and within reach of students,” Thorndike said.

The first steps of the Resources Optimization Initiative began in 2017 following the creation of a task force by the Penn State administration and Board of Trustees. In September 2018, based on several recommendations by a consulting group hired by the task force, President Barron established the 11 working groups. Along with President Barron, the executive sponsors for this effort include Nick Jones, executive vice president and provost; Frank Guadagnino, vice president for administration; and Thorndike.

For more information, visit the Resource Optimization Initiative website.

Last Updated October 26, 2021