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University Loft finds growing niche in hospitality industry: Indianapolis-based furniture manufacturer known for college products sees big potential in hotel segment

February 12, 2007

The University Loft Co.'s graduation from dormitory to hotel-furniture maker is beginning to show promise.

While the Indianapolis-based manufacturer's bread and butter remains campus furnishings, its decision to enter the hospitality market in 2003 has CEO James Jannetides thinking big-as in presidentialsuite big.

In four years, the ULC Hospitality division has grown to account for nearly 10 percent of the company's $100 million annual revenue. Jannetides, though, envisions the branch's eventually contributing half in his quest to someday make ULC a billion-dollar corporation.

The company's foray into the hospitality market so far has produced contracts to build sofas and case furniture such as television stands and drawer units mainly for San Antonio, Texas-based La Quinta and Beverly Hills, Calif.-based Hilton Hotels Corp.

"It's real easy for us to gain the business once the client experiences us, because everything we make is built way better than the industry standard," Jannetides boasted. "A college kid will tear up an anvil with a corncob. Servicing anybody else is pretty easy."

Even so, cracking a segment in which existing vendors are "entrenched" in the industry has proven difficult at times, he admitted. Coincidentally, one of ULC's largest competitors for case furniture is another Indiana-based company, Kimball International Inc., in Jasper.

Helping ULC get a foot in the door is its status as an exclusive vendor for Arkansasbased Sam's Club, from which hoteliers can buy conference room chairs and other pieces.

The potential for growth within the hospitality industry has Jannetides searching for a director to lead the division. But determining how much hotels spend annually on furniture is difficult. No one tracks that information, according to the American Hotel & Lodging Association in Washington, D.C. A study by accounting firm PricewaterhouseCoopers LLP estimated hotels last year spent $5 billion on renovations in general.

Breaking into the biz

Jannetides founded ULC in 1986 while attending Southern Illinois University in Carbondale. His peers admired the loft he built for his room so much that Jannetides invested his savings in enough wood to build 400 lofts during a summer that he sold the following school year.

Today, hundreds of institutions, from Yale University and the U.S. Naval Academy to Indiana University and Butler University, buy from University Loft. The products are manufactured in Malaysia and shipped to Indianapolis or Morristown, Tenn., for assembly. University Loft has 210 employees in the United States: 133 in Indianapolis, 65 in Tennessee, and 12 outside salespeople.

The company's introduction to the hospitality industry began at its Tennessee plant, where it made products for the Chicago-based Shelby Williams Industries. Shelby Williams supplied furniture to Hilton Garden Inns and Omni Hotels, but encountered financial problems and was acquired in 1999.

"We were doing thousands of pieces a week for somebody," Jannetides said, "and when that stops, you have to keep those people working."

So with designs and styles already established, ULC began selling directly to the hotel chains and ultimately established its hospitality division in 2003.

The company's relationship with La Quinta stems from its signing of a ninerace deal as a sponsor of Indy Racing League team Access MotorSports during the 2004 season. Jannetides had a suite at Texas Motor Speedway and invited La Quinta executives as corporate guests, who reciprocated by letting ULC bid on work.

New headquarters

University Loft's revenue has more than doubled during the past five years, due in large part to its expansion into hotels and military installations. A line developed for sale through retailers such as Kittle's Furniture should help push sales higher, too.

The impressive results are causing growing pains, though. The company purchased 1,100 acres last year at the southwest corner of Hancock County roads 300 North and 400 West to build a new headquarters and manufacturing plant.

The first phase, comprising 340 acres for the 500,000-square-foot, $11.7 million project, is expected to be finished in August. It will feature space simulating the inside of an actual hotel, so buyers can view furniture as if it were in an actual room.

The company currently operates from locations on East Washington Street and Hillside Avenue. Whether ULC will close the plant in Tennessee and move those operations here remains unclear. Jannetides declined to comment on the possibility.

His insistence that Hancock County commissioners create a Tax Increment Financing district to provide incentives needed to bring 200 jobs to the county fell on deaf ears. The commissioners in October said such a district would cost taxpayers too much to justify the types of jobs the Indianapolis firm would bring.

The Hancock County Council approved a 10-year tax abatement for the project and commissioners signed off on rezoning of the land. Moreover, the Indiana Economic Development Corp. awarded a $1.3 million incentive for site infrastructure near Mount Comfort. But when Jannetides requested a TIF district be established to pay for another $1.2 million in infrastructure upgrades, two commissioners didn't want to study it. Commissioner Jack Heiden favored considering the request.

"They looked at their options and decided this was still the best option," Heiden said. "I think it's a good project. The TIF district wasn't going to fly, but I think they've shown they didn't need it to relocate."

Jannetides, however, said he bought the property after failing to find a similar-size tract, and because he's hoping commissioners might have a change of heart and approve a TIF. Armin Apple, whom Jannetides described as the most vocal critic of his request, is no longer a commissioner.

Jannetides plans to develop a multitenant business park on the remaining 770 acres he purchased and wants the TIF to help fund construction of an interchange for the proposed Indiana Commerce Connector, a toll road that would stretch from Pendleton to Mooresville.
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