In March 2024, the University of Maine in Orono opened a hotel on campus as part of a public-private partnership with the hope of reviving aging buildings that were costing the university money.
But Hotel Ursa has failed to meet its annual operating income goals, putting the state’s flagship university on the hook for more than $1.5 million over the last three years, according to financial records obtained by The Maine Monitor. UMaine’s contract with Hotel Ursa requires the university to make up the difference if the hotel does not earn a certain amount of net operating income each year. The shortfall payments stand to increase each year over the 25-year contract, which was signed in 2022.
In its first year, UMaine paid Hotel Ursa $339,933 to make up for its income shortage. The following year it paid $577,289, according to the records. The university expects to pay another nearly $594,608 for the 2026 fiscal year, which ended in June, University of Maine System spokesperson Samantha Warren said.
Now the university hopes to offset its future shortfall payments by renting the hotel to house students, paying more than $1 million annually to Hotel Ursa. It plans to house 57 graduate and upperclass undergraduate students in 37 of the hotel’s 95 rooms, granting them access to the hotel’s cafe and laundry. Depending on the room type, students will pay the university between $4,400 and $5,200 per semester. So far, 54 students are confirmed to move in, Warren said.
But while the university might now be able to eliminate its guaranteed payments to cover the hotel’s shortfall, the school will still be on the hook to pay the hotel more than $575,000 under its new lease agreement, which begins Aug. 26, to house students. That’s because the university’s total cost to rent the hotel rooms exceeds $1 million, and student room fees will only generate about $514,000 in revenue for the university this year.
UMaine officials said they see the arrangement as a win-win scenario as it will allow them to expand the number of beds available to students while offsetting UMaine’s shortfall payments.
Warren argued that the remaining $575,000 that UMaine must pay in rent is less than the $612,446 that UMaine might have owed the hotel for profit shortfalls next summer, per the contract that lists the maximum shortfall payments the university could owe each year.
“It’s impossible to overstate what it’s been like for the university to have this asset in the heart of campus,” Warren said.
UMaine stands behind the hotel partnership as the hotel is beneficial for recruiting students, faculty, donors and business partners, and it provides property tax benefits — more than $317,000 for the 2026 fiscal year — to the town of Orono, Warren said.
University officials said they planned early on to share the profits and losses of the hotel. At the beginning of each fiscal year, which starts in July, UMaine budgets to pay the hotel for net operating income shortfalls from the fiscal year prior.
“Would we have loved to not make those payments? 100%. Did we expect to make those payments? Absolutely,” Warren said in an interview with The Monitor. “Has this been a worthwhile investment, and does it continue to be a worthwhile investment for the institution and the broader region? 100%.”
Others on campus had mixed responses.
Faculty Senate President Brian McGill expressed frustration that the university took on what he described as a bad deal four years ago and that the fiscal burden of the hotel is straining an already-tight budget. UMaine has projected an $18 million shortfall for this current school year and said it would need to lay off staff.
“I don’t know if we have much control over whether the hotel is successful or not because it’s being operated by a private company,” McGill said. “If they run it badly, we pay. That seems like a terrible deal to me.”
UMaine formed the hotel as a public-private partnership with developer Radnor Property Group, based in Pennsylvania. It is managed by Portland-based Olympia Hospitality. Under the arrangement, the university could earn money from the hotel, but it has not collected any so far.
One student expressed concern about privatizing more spaces on campus.
“[W]e’re uneasy with UMS’ increasing development of these public-private partnership projects that effectively hand over a public stake in our university system to private investment and management companies,” Peter Howe, a UMaine Ph.D. student and vice president of the UMaine Graduate Workers Union, wrote to The Monitor. “Now we’re locked into contracts and space use that may not always serve the public mission of the University, educationally or financially.”
Aurora Green, president of the UMaine Graduate Workers Union, said that a hotel would offer better living conditions compared with what she described as subpar dorm conditions elsewhere on campus.
“It definitely looks embarrassing that the university has to be moving students into the hotel,” Green said. “My optimism is only that the conditions will be better since it’s newly renovated.”
‘The best option at the time for us’
Hotel Ursa is made up of three buildings on campus, two of which UMaine sought years ago to repurpose. Those buildings, Coburn and Holmes halls, were vacant and cost UMaine more than $100,000 annually to heat, according to a 2020 feasibility study of the two buildings. The properties also needed significant renovations — about $10.4 million in deferred maintenance at the time — to bring the buildings up to code and accessibility standards, the study said.
Brailsford & Dunlavey, the consulting firm that conducted the study, described the buildings as “unfit for tenants,” and suggested UMaine pursue one of two projects to revive them. The first was a hotel. The consultants predicted a 65-room hotel would likely outperform the local hospitality market and be cash-flow positive in its first year at $133 a night with a 60% occupancy rate.
Or, the firm suggested, UMaine could turn the buildings into office space, which it projected could be cash-flow positive within two years.
In the study, the firm said that UMaine should bring in a private entity to run the enterprise that would take on almost all of the risk.
“The University is willing to support the project by covering shared operating costs (i.e., trash removal, grounds, etc.),” the report stated. “Aside from these, the private entity should anticipate assuming all the risks associated with financing, delivering, occupying, and maintaining this development.”
Warren said in an email to The Monitor that UMaine was “agnostic to the most appropriate concept” for reviving the aging buildings.
“The clear benefits of attracting more visitors to UMaine, enhancing the vibrancy of our R1, D1, land-grant university year-round, and securing tens of millions of dollars in private investment to modernize a historic asset in the heart of campus made the hotel the best option at the time for us and also for the Town of Orono and the greater Bangor region,” Warren wrote.
UMaine reconstructed the buildings into a boutique hotel with 95 rooms. The university initially invested $1.8 million into renovations for Hotel Ursa and another $1.18 million into the parking lot and roadways surrounding the buildings, according to the university’s contribution agreement. Radnor Property Group, a real estate developer that specializes in student housing and campus infrastructure, covered the remaining construction costs, according to the UMaine’s contract with Radnor.
The hotel started as a $17 million project, but the onset of the COVID-19 pandemic inflated the cost to $28 million, according to Jake Ward, UMaine vice president of strategic partnerships, innovation, resources and engagement.
He explained that occupancy has been lower than expected since the hotel opened two years ago, and the hospitality market has declined.
“We didn’t sell enough rooms during that time period,” Ward said.
Rooms at the hotel are priced dynamically, meaning cost goes up when demand is higher. As of early August, a standard room ranged between $143 and $280 a night.
UMaine officials said that Olympia Hospitality could best explain the hotel’s business and provide more details about occupancy rates and why it was not performing as expected. But Heather Assi Antonin, Hotel Ursa’s general manager, did not respond to two phone calls from The Monitor.
A representative for Olympia Hospitality, which manages more than 40 other hotels, including some on university campuses, did not respond to four emailed interview requests. Radnor, the developer that put Olympia in charge of the hotel, did not respond to two requests for an interview about the hotel’s performance.
‘We’re just not there yet’
Even with UMaine paying the hotel an annual rent of $1 million to house students — only half of which student fees will cover — the university is still potentially on the hook for shortfall payments.
In fiscal years 2025 and 2026, UMaine paid the maximum amount of shortfall to the hotel. In 20 years, as laid out in the contract, UMaine’s maximum payment could exceed $1 million annually if the hotel doesn’t bring in enough revenue.
UMaine officials argued that the partnership is still worthwhile and that the financial agreement the university shares with the hotel is not unusual.
The system that oversees Maine’s public universities, for instance, partners with Sodexo, a food service company, to manage campus dining operations. Under that agreement, UMaine promises Sodexo a profit minimum of 3%, with UMaine covering any shortfall, according to its agreement with the company. UMaine can also receive part of Sodexo’s earnings if the company makes a higher profit. The system has not had to directly cover any revenue shortfall for Sodexo, and is expecting to earn at least $600,000 from Sodexo in fiscal year 2026, according to UMaine’s agreement with the company.
Under UMaine’s agreement with Hotel Ursa, the university can receive a 20% share of the hotel’s net operating income each year. Though the university has not yet received any money from the hotel, it hopes the property will be more profitable once it houses students.
“When we get to that point where we’re in the profit sharing, then we’ll phase down what we’re budgeting for backstop,” said Jenny Boyden, vice president for finance and administration and chief business officer. “It would be great to see profit sharing and be able to book that revenue piece coming in instead. We’re just not there yet.”
This story appears as part of a collaboration to strengthen investigative journalism in Maine between the BDN and The Maine Monitor. Read more about the partnership.