Marcellus Shale Gas Fuels PA Hotel Industry Growth

An analysis of hotel occupancy rates in northeast Pennsylvania by PKF Consulting, published on Hotel Online, shows the huge impact Marcellus Shale gas drilling is having in the region. PKF reports that revenue per available room (RevPAR) has grown at an annual rate of 14.8 percent from 2007 to 2011. Additionally, the average daily room rate (ADR) has grown a “remarkable” 7.8 percent annually during the same period. Compare PA’s northeast Marcellus hotels with national averages for the same period, which were 1.7 percent RevPAR and 0.7 percent ADR.

While the vast majority of U.S. lodging markets were suffering from declines in revenue during the recent recession, hotels in northeastern Pennsylvania bucked national trends and achieved significant growth in RevPAR each and every year from 2007 through 2011. During this period, RevPAR for hotels located in the Pennsylvania counties of Bradford, Lycoming, Susquehanna and Tioga has grown at an estimated average annual rate of 14.8 percent. This compares to the 1.7 percent average annual decline in RevPAR experienced by the overall U.S. lodging industry during the same time frame.

“When we present these data, most people think it is a misprint,” said Tony Biddle, senior consultant in the Philadelphia office of PKF Consulting USA. “The remarkable RevPAR growth observed in northeastern Pennsylvania is largely attributable to the exploitation of an old resource through the birth of a new industry: natural gas extraction from the Marcellus Shale.”

Prior to 2007, market occupancies in northeastern Pennsylvania consistently averaged in the mid 50’s. However, in recent years, the occupancy rate has exceeded 70 percent and continues to increase.

“The correlation between drilling and lodging demand growth in the early stages of Marcellus development is intriguing,” Biddle said. “When you array the number of wells drilled in the region to the growth in lodging demand, you see a fairly consistent ratio of 200 new annual room nights of lodging demand per new well.”

While the 14.8 percent annual growth in demand for the region’s hotels is remarkable, the 7.8 percent average annual increase in ADR over the past four years is even more outstanding given the sluggish economy and performance of the overall U.S. lodging industry. From 2007 to 2011, the average annual change in ADR for all U.S. hotels has been negative 0.7 percent.*

*Hotel Online (Jan 10, 2012) – Shale Natural Gas Fueling Pennsylvania Hotel Industry