If you drill it, will they come? According to a recent analysis of hotel occupancy rates in northeast Pennsylvania, yes – they will.
From 2007 to 2011, revenue per available room (RevPAR) for hotels located in the Pennsylvania counties of Bradford, Lycoming, Susquehanna and Tioga grew at an annual rate of 14.8 percent, Hospitality research firm PKF Consulting reports. Even more impressive, the hotels saw their revenues increase while the overall U.S. lodging industry suffered from a 1.7 percent annual decline in RevPAR during the same time frame.
Tony Biddle, senior consultant with PKF in Philadelphia, was not shy to credit the four-year growth spurt to the 84 trillion cubic feet of Marcellus shale gas underlying much of northeastern Appalachia, including northern, central and western Pennsylvania.
When we present these data, most people think it is a misprint. 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.
Service industries like hotels and restaurants are at the tail end of a job creation “ripple effect” that begins when the drill first meets the ground. Jobs result from the drilling itself, but new jobs are also created to support the drilling, such as construction and transportation, and still more jobs spring up in the service industries to provide for all the new laborers.
The chemistry industry can tell a similar story. Increased shale gas production means more affordable, available natural gas and ethane supplies for U.S. chemistry companies. That leads to new jobs in the chemistry industry; more new jobs in the industries that support the new or expanded chemical production, such as construction and piping for a chemical plant; and still more new jobs created when those new jobholders spend their dollars on local services such as hotels, restaurants, banking and retail shopping.
According to a recent ACC study, a realistic 25 percent increase in ethane supply would generate 17,000 new chemical industry jobs, 165,000 jobs in our supplier industries, and 230,000 jobs supporting all of those jobs.
As the Wall Street Journal reported late last year, vast new supplies have already set off a multi-state “race” to attract a world-class ethane cracker plant, an investment that, in Pennsylvania alone, could create 17,000 permanent jobs, put more than $1.2 billion in workers’ pockets and generate more than $140 million in state tax revenue.
Wrapping up his analysis of the Pennsylvania hotel industry, Tony Biddle left a big tip for hoteliers and manufacturers alike:
Hoteliers should be aware of the new shale explorations that are occurring all across the nation. Shale drilling has the potential to not only stimulate new lodging markets, like we’ve seen in Pennsylvania, but supplement existing markets as well.