Oversupply in Pennsylvania's Marcellus Shale region leads to drop in occupancy

Due to increased drilling for natural gas in Pennsylvania's Marcellus Shale region there was in increase in hotel development for the area. However, research from Penn State is showing that the area has been overbuilt, as shown by faltering occupancy.

Marcellus drilling operations generated approximately $685 million in hotel revenues and added an extra 1,600 new hotel jobs since 2006, according to the researchers, who report their findings in the International Council on Hotel, Restaurant, and Institutional Education Penn State Research Reports. However, the latest figures show that demand for rooms may be decreasing. For example, in 2012, demand was flat and occupancy was down 4.1 percent.

If demand continues to decrease, the older, non-franchised hotels may be the most vulnerable to bankruptcy and closure, according to Daniel Mount, an associate professor in hospitality management. Of the 14 hotels that closed between 2006 and 2012, nine did not have a national franchise. The average age of the 14 closed hotels was more than 38 years old.

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The flat rate contrasts with the explosive growth of hotel construction during the early stages of the drilling boom. Hotel developers built 65 hotels in the drilling region, which is a far greater number than national trends would suggest for hotel development, said Mount, who worked with Timothy Kelsey, professor of agricultural economics and co-director of the Center for Economic and Community Development and Kathryn Brasier, associate professor of rural sociology.

Alternative housing may explain some of the lower demand, as well, said Mount. Some companies that originally assigned workers to hotel rooms may now be housing them at alternative sites, such as apartment complexes or mobile homes, further reducing demand for hotel space.

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