Hotels and oil/gas development booms, busts, and the future of hotels in oil/gas development areas

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Abstract

The development of new production methodologies for oil and gas wells has revolutionized energy production in the United States, shifting the country from a net importer to a net exporter of oil and natural gas (United States Energy Information Administration, 2015). The combination of horizontal drilling and hydraulic fracturing has allowed development of previously known but inaccessible energy reserves, spurring intensive energy development in varied locations across the country. With this new development has come a rapid expansion in housing needs for workers. Historically, developments such as this are prone to boom/bust cycles. This paper studies the effect of the housing needs in various drilling locations through a study of hotel performance over a 12-year period. This study finds that drilling activity has significantly increased hotel revenues in the drilling areas, but because of falling prices and oversupply, individual hotels are struggling to maintain break-even occupancies. Based on forecasts for oil and gas prices, with additional new supply, this bust cycle will continue through 2018.

Original languageEnglish (US)
Article number5
Pages (from-to)36-47
Number of pages12
JournalJournal of Hospitality Financial Management
Volume26
Issue number1
DOIs
StatePublished - Jan 1 2018

All Science Journal Classification (ASJC) codes

  • Finance
  • Tourism, Leisure and Hospitality Management
  • Strategy and Management

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