Ben Weprin loves a good road trip, but when he celebrated the acquisition of his latest Graduate Hotels property this past year, he didn't just hop in one of the spiffy vintage Jeeps or Grand Wagoneers he collects. Instead, Weprin commandeered an exact replica of the fur-covered Mutt Cutts van, floppy dog ears and all, from the cult movie classic Dumb and Dumber.
The founder of AJ Capital Partners, an investment outfit in Chicago that develops hospitality destinations, is wacky like that, but he clearly keeps business front and center. In 2014 he noticed that most college towns lack any chic or upscale accommodations. His answer: a collection of hotels that reside in the most dynamic university towns across the country, each uniquely tailored to the spirit of the college community.
The tailgate tour in his Mutt Cutts van, stocked with Yeti coolers and cornhole boards, was an opportunity to engage with students, locals and visitors on the way to Providence, Rhode Island, home both to the movie's characters and Graduate's forthcoming location opposite Brown University.
To Weprin, 39, being creative, enthusiastic and a little weird is what makes his brand so unique. On track to open 25 affordable boutique properties in university markets across the United States, Graduate is taking on hotel giants less with corporate muscle than with the dash and whimsy that are the signatures of the company's charmingly offbeat founder.
He has already opened 10 Graduate Hotels, in places like Ann Arbor, Michigan; Richmond, Virginia; Minneapolis; and Tempe, Arizona. By 2019 additional locations will include Iowa City, Iowa; New Haven, Connecticut; Bloomington, Indiana; and Seattle.
A typical Graduate property isn't very typical at all. Each is tailored to the school's culture and locale. The picket fence at the Bloomington, Indiana, location references a memorable scene from the movie Hoosiers, which featured the school. Graduate Minneapolis, which opened last month near UMN, has hundreds of visual allusions to Prince's Purple Rain.
Some Graduate properties are newly built; others reimagine existing structures, like the former Hotel Duncan at Yale University, which the company acquired this fall and plans to open in 2019. Graduate rooms are typically under $250 per night.
"We're not a cookie-cutter hotel chain, and we're okay with that," says Weprin, who holds an MBA from Northwestern's Kellogg School of Management and lives in Chicago. Weprin started out working for his father's national real estate firm and within a few years was among the company's top brokers. He opened and ran an office in Nashville for several years but came back to Chicago to work for restaurant investor Larry Levy. One of Weprin's earliest wins was pulling together an investment group of his own, AJ Capital, to buy Levy's stake in Auberge Resorts.
From the beginning, investors loved Weprin's affable personality and knack for delivering returns on projects other groups passed by. This past fall, AJ Capital closed round-two funding to bring its total investment pool to $1.5 billion. Funders include Hong Kong-based Gaw Capital Partners. Graduate Hotels is now the company's primary focus.
"Ben is trying to merge really well-located real estate with a creative spin in these robust college towns where there's fantastic built-in demand," says Michael Nash, a senior managing director of real estate at Blackstone, which provided the loan for Fund II against the company portfolio. Graduate currently has nine properties with 25 slated for opening by 2020 and an ambitious expansion goal of 100 markets within ten years. "What Ben's doing isn't easy, but he's young, spirited, entrepreneurial and truly passionate about this platform," Nash says.
Still, Weprin doesn't fit the stuffy CEO stereotype. He loves thrift-store art, Nike T-shirts and vintage flannel and insists on adding funky touches to his Graduate locations. The rooms of the Berkeley, California, hotel feature lamps fashioned from bongs, and a lobby wall of 8,500 National Geographic magazines (the yellow border matches Cal's university colors). "For me this business isn't about how we can be everything to everybody – it's more, how can we be unique in a way people will love," he says. "A lot of it comes down to what's personally appealing to me."
The Graduate vibe might attract prospective students, parents and visiting professors, but is it a winning and scalable formula in a highly competitive hospitality market? Maggie Rauch, a research director at Phocuswright, which monitors the travel industry, says "the reality for a lesser-known hotel group like Graduate is that the United States is the most consolidated big-brand-dominated hotel market on Earth, and there's little room if you're not a Marriott or Hyatt."
At the same time, Graduate arrives at a moment when consumers, particularly millennials, are searching for alternatives to conventional hotel stays. In recent years, Marriott's smaller, Aloft and Moxy divisions, Hilton Centric, Radisson Red and Hilton's Canopy properties have all aimed to create a hotel experience that's predictable without being generic.
"Delivering a sense of offbeat authenticity can be hard for a big hotel company to pull off," says Rauch, who says that's one reason online hospitality services like Airbnb and VRBO have taken off. "If Graduate can give people the feeling they're not staying at a boring chain, they're likely to grow their customer circles by word of mouth."
One unique challenge to Graduate is the ebb-and-flow nature of college life itself, where summers and holiday breaks are traditionally slow and where longtime customers can be hard to find in a market where students cycle in and out every four years.
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Weprin insists that's a misrepresentation. "We're not going into remote college towns that don't have diverse demand," he says. "In summer in Tempe, we're right by spring training. In Iowa City we're in the thick of where everything is happening in a great dynamic city. In Charlottesville we're right across from a major hospital. We're a cultural hub for people in these towns, as much as a place for Mom and Dad to stay on alumni weekend."
Graduate is building a 195-room hotel on New York's Roosevelt Island at Cornell Tech. Scheduled to open in 2019, it's part of a new campus and will be the island's only hotel. Other openings are scheduled for Lincoln, Nebraska; Richmond, Virginia and Seattle.
Weprin says the goal in the long run is to "build something that's attractive to a lot of exit opportunities, whether that's a portfolio sale, an IPO or a deal-by-deal exit." But in the short term, the idea is clearly to have fun. "What we're best at is being creative, enthusiastic and a little weird," he says. "We're taking a chance and trying to do something different. As Dr. Seuss once put it, 'You have to be odd to be No. 1.'"
— By David Hochman, special to CNBC.com