Penn State getting out of hotel business

University to sell iconic Nittany Lion Inn and one other property

STATE COLLEGE — Penn State’s two on-campus hotels — including the iconic Nittany Lion Inn — are poised to be sold to a third party this fall and will remain in operation, based on a resolution passed unanimously Wednesday morning by the board of trustees.

Scholar Hotel Group, which opened a 72-room hotel in downtown State College in January 2021, is the “preferred partner” of the university. As a result, it is set to negotiate both the purchase and ground lease for the 300-room Penn Stater Hotel & Conference Center and the 223-room Nittany Lion Inn.

“The university will continue to own the land that the hotels sit on, but the buildings would be owned by Scholar with a long-term ground lease,” said Sara Thorndike, senior vice president for finance and business. “Eventually, at the end of the long-term ground lease, the buildings would come back to be owned by the university to reevaluate operations.”

It is not known how long the ground lease might be — they typically range between 50 and 99 years — and it’s also not yet known how much Penn State might receive for the sale. Thorndike said during the brief public meeting that the university intends to continue negotiating the “confidential terms,” which were shared with the trustees but not with the public.

The university expects the Penn Stater will remain open, although the Nittany Lion Inn will remain closed until 2024.

How did we get here?

Penn State hired a consultant, Rieth Jones Advisors, in May 2021 to “begin exploring options” for both of University Park’s on-campus hotels.

That move was a continuation of a 2018 university initiative to reduce costs and increase revenues, which came as a result of a 2017 Affordability Task Force comprised of trustees and administrators. Ultimately, RJA indicated there was “strategic value” for the university to sell and ground-lease the hotels.

“While both hotels have served the university community well for decades and hold a special place in Penn State history, after the in-depth evaluation to examine hotel operations, Penn State has made the determination that divesting from the hotel businesses will enable us to focus on our core missions that remain teaching, research and service,” Thorndike said in a news release.

The hotels are both self-sustaining, meaning no state funds or tuition dollars are used toward them.

Both hotels took considerable financial hits during the COVID-19 pandemic, and Thorndike referred to “significant deferred maintenance” on Wednesday. While the 28-year-old Penn Stater hotel remained open throughout most of the pandemic, the Nittany Lion Inn saw more disruptions.

The inn closed to hotel visitors in March 2020 and, after some backand-forth, Penn State decided to use the 91-year-old Georgian-style hotel as classroom space and single-occupancy student housing. This past school year, the Nittany Lion Inn was primarily used for student housing at a cost of $4,975 per semester — but it was not listed as available for the 20222023 academic year.

Who’s the new owner?

Scholar Hotel Group, which is set to purchase and ground-lease the hotels, should be a name familiar to many in the State College area.

The group owns the 165-room Hyatt Place State College, the anchor of Fraser Centre, that opened downtown in March 2017. And, last year, it also opened Scholar Hotel State College — also in downtown — after renovating the historic Glennland Building, which was built in 1933 and housed central Pennsylvania’s first indoor pool and the town’s first public elevator.

Scholar Hotel Group took care in paying homage to the building’s history. A large, backlit print of the famous indoor pool greets visitors behind the front desk; window millwork has been replaced but the same look has been preserved; and Penn State prints are hung in every room.

“This building, and a few others, are the most iconic buildings downtown, and we have to be protective of them,” company founder and President Gary Brandeis told the CDT in January 2021. “So we took the opportunity to protect it, but reimagine what it could be.”

Brandeis, a 1988 Penn State grad, and the Scholar Hotel Group also count hotel properties near Syracuse University and West Virginia University as part of their portfolio.

In a news release Wednesday, Brandeis said through Penn State that he was looking forward to Scholar Hotel Group playing a greater role in this community.

“Scholar Hotel Group is excited to work through the specifics with Penn State and is committed to providing the highest quality hospitality services and environments to the Penn State and local communities,” he said.

What comes next?

Wednesday’s virtual board of trustees meeting was announced Tuesday. After meeting in executive session, the board met publicly for just eight minutes before its unanimous vote on proceeding with a purchase agreement and ground lease of Penn State’s two hotels.

The university expects a deal to be finalized by the fall. But some questions remain.

It’s not yet known, for example, what will happen to current unionized hotel employees, which belong to Teamsters Local Union

No. 8. Thorndike said Penn State will be “exploring a variety of opportunities” for the employees, adding that Scholar Hotel Group “is also interested in discussing employment opportunities with employees” who want to remain at the hotel.

Union President Jonathan Light told the CDT that he spoke with the university Wednesday — and not yet Scholar Hotel Group — and is setting up meetings with those affected.

“Obviously, we are upset of this news and the board of trustees’ decision to sell,” he said in an email. “We have many members there. Also, they worked extremely hard during the reopening of those facilities since COVID — and hopefully Penn State recognizes this when we get to sit down with them and retain employment for our members.”

An official with Scholar Hotel Group referred questions to the university, saying it still has a lot of details to finalize, with more information to be released in the coming weeks and months.

In addition to union employees, Thorndike also acknowledged that the hotels are “very important” to the university’s School of Hospitality Management. However, she said the university attempted to find a partner that would still support the school’s involvement.

“While specific plans between Penn State and Scholar Hotel Group are being defined, the university’s goal is to support students, faculty, staff, visitors and community members,” Thorndike said in a news release.