To some degree, this is true. I worked at Conn College from 1985-1996, and the evolution/upgrade in student facilities was constant: athletic center, student center, dorms remodeled to include A/C, added parking, wiring for internet, etc.,
However, if a school doesn't do this..they're sunk. They will not attract a desirable freshman class if they don't have the bells and whistles that their competition has. And, mom & dad & junior don't look upon this stuff as bells n' whistles - they look upon this stuff as essential.
We can go on at length as to the effect this has on the cost of education, as to whether this changes the focus of a college experience from academic to non-academic, what impact it has on the perceived value of a particular education, but, that's not going to change anything.
I happen to believe that part of the impetus behind this is the changing demographic of the American Family. Baby-boom families were large, and going to college was more the exception than the rule. You were glad to get into a school, and accepted a more spartan enviroment.
Now, American families often have just one or two children. You pour everything into those couple/few kids, and they're used to being the focus of attention. You want the best for them, and you'll go elsewhere if they don't get it.
When I was at Conn College, I proposed (somewhat tongue-in-check) that we should have a rule that no student should be allowed to register a car on campus that costs more than one semester's tuition, room, and board fee. I figured that, if the vehicle they were using to go to the mall on Saturday, or the packy on Friday night, was worth more than a semester's education, then we were gonna have a tough time making them take their classes seriously.