Colleges have to spend lots of money on amenities because they need something tangible to sell to students.
You can't really test drive a college or take home a sample. Comparing the quality of an education between two institutions is hard and highly subjective.
But if one school has shiny new dorms with fancy features, you draw some conclusions compared to the other school that hasn't modernized in thirty years. The comparisons may be unfair and incorrect, but you draw them anyway.
This explains why much of the spending on campus is going towards facilities not directly related to teaching. Its what sells the place.