Colleges & Universities

Technomic, the Chicago-based foodservice market consulting firm, forecasts that college and university dining sales will achieve nominal growth of 3 percent this year. Not as good as last year (4.9 percent), but given the economy, a fairly positive outlook.

At the same time, administrators at colleges and universities are facing immense challenges. Sharp declines in the value of endowment investments have put the spending plans of many schools into disarray (a just-released survey by the Commonfund Institute and NACUBO says these funds dropped an average of 22.5 percent in the first half of the 2009 fiscal year at most institutions).

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Complicating these losses are reductions in general tax revenues at the state level. As appropriations for higher education have been cut (Fig. 9), it has put additional pressure on the budgets of state-supported schools.

Looking ahead to next year, many smaller private colleges are reporting application rates are down. Those with tuition-driven budgets worry that even modest dips in enrollment will have serious implications.

The average cost of room and board (Fig. 8) has continued to rise, but at a consistently slower rate than tuition and fees. (Over the past decade, tuition and fees at public colleges have risen at an average rate of 4.2 percent a year after inflation, according to the College Board). And a new report, from the National Center for Public Policy and Higher Education, warns that the rising cost of attending college is rapidly outstripping increases in family income, rising even faster than the cost of medical care (Fig. 7).

This is drawing much public policy scrutiny to the segment and inevitably will have implications for dining departments, which remain one of the few sources of cash income on a campus. As schools come under increasing pressure to control costs they will, as always, look to foodservice to help defray overhead with increased contributions.

College operators have struggled to keep rising food and labor costs under control for several years (Fig. 12). At the same time, many were burned in 2008 by unexpectedly high increases in food costs (a trend not yet reflected in Fig 12 data). It will be hard for them to hold the line in 2009-10.

On the positive side, even low-end forecasts from the National Center for Education Statistics still call for enrollments overall to increase in the next few years. Further, the new GI Bill signed into law last June will encourage returning war veterans to seek degrees; and in many cases it will provide monthly housing allowances in addition to help with tuition and fees. In terms of operations, dining departments seem to be making real headway in covering increased internal costs with higher revenues per meal and higher average c-store transactions (Fig. 12).

Market basket surveys show that retail price increases have been modest (Fig 11). There will likely be pressure to increase these as dining strives to make it all balance out. “My guess is that a big debate will take place this summer when retail prices are re-set for the fall,” says Tom Newcomb, president of FoodMark®/Campus Dining Inc., a benchmarking data research firm.