Hotel Online
News for the Hospitality Executive


Shale Natural Gas Fueling Pennsylvania Hotel Industry

January 10, 2012, Philadelphia, PA – 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.”
The Marcellus Shale is a massive geological formation underlying much of northeastern Appalachia, including northern, central and western Pennsylvania.  In August 2011, the U.S. Geologic Survey estimated that the Marcellus formation contains 84 trillion cubic feet (Tcf) of natural gas, propelling it to among the largest known shale natural gas “plays” in the world.
Drilling and Demand
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.
The Region’s Future
The pace of future drilling activity is inherently difficult to predict due to a variety of factors, such as events in the political and legislative arenas and external macroeconomic trends.  However, the Marcellus Shale Education and Training Center (MSETC), a collaboration of the Pennsylvania College of Technology and the Penn State Cooperative Extension, has published mid-term projections of Marcellus drilling for an area of Pennsylvania overlaying the northeast region.
The MSETC projections indicate that heavy drilling activity in excess of 1,000 wells per year will continue in the region through at least 2014; however, the current rapid growth trend is expected to plateau in 2012.  “Given the demonstrated historical relationship between drilling activity and lodging demand in the region, it appears that the majority of incremental drilling impacts to demand in this region have already been felt.  That said, we note that prior projections by MSETC have underestimated drilling growth, and as we move forward, the 2012 outlook deserves close monitoring,” Biddle advised.
National Implications
An article in the December 27, 2011 edition of the Wall Street Journal noted that the boom in low-cost natural gas obtained from shale is “driving investment in plants that use gas for fuel, setting off a race by states to attract such factories.”  This will continue to push the demand for shale natural gas.  Therefore, we are seeing the new technological advancements which have unlocked shale gas reserves in Pennsylvania being applied in other regions of the U.S.
“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,” Biddle concludes.
To learn more about the impact of shale drilling on the lodging industry, please contact Tony Biddle at [email protected] or (215) 563-5300, ext 29.
Headquartered in San Francisco, PKF Consulting USA ( is an advisory and real estate firm specializing in the hospitality industry.  PKF Consulting USA is owned by FirstService Corporation (FSRV) and is a subsidiary of Colliers International.  The firm operates two companies: PKF Consulting USA and PKF Hospitality Research.  The firm has offices in New York, Boston, Portland, Indianapolis, Chicago, Philadelphia, Washington DC, Atlanta, Asheville, Jacksonville, Orlando, Tampa, Houston, Dallas, Los Angeles, Bozeman, and San Francisco.


Tony Biddle
PKF Consulting USA
Tel: 215 563 5300, ext 29
Email: [email protected]

  Chris Daly
Daly Gray Public Relations
Tel: 703 435 6293
Email: [email protected]

Receive Your Hospitality Industry Headlines via Email for Free! Subscribe Here  

To Learn More About Your News Being Published on Hotel-Online Inquire Here

Also See: PKF's U.S. Hotel Forecast Indicates Recovery Better For Some, Not All; Overall RevPAR Projected to be up 8.1% in 2011 Followed by 6.1% Increase in 2012 / December 2011

Lodging Asset Values In Recovery / Scott Smith & Bill Morton / November 2011

Video: PKF's Robert Mandelbaum Highlights Findings of the 2011 Trends® in the Hotel Industry; Good News for Hotel Profits / August 2011

Video: PKF's Mark Woodworth Discusses the Current State of the U.S. Lodging Industry in Hotel Horizons Update / July 2011

Video: PKF's Mark Woodworth and Jack Corgel Discuss the Current State of the U.S. Lodging Industry in Hotel Horizons Update / March 2011

Lodging Insights: a Video Overview of Investment Conditions for the U.S. Lodging Industry and What's Ahead for 2011 / January 2011

The Potential Effect of the Proposed Payroll Tax Reduction on the U.S. Lodging Industry; 1.5 Million More Jobs Would Result in Greater Lodging Demand, Profits / Mark Woodworth / December 2010

PKF-Hospitality Research's December Hotel Horizons® Shows U.S. Lodging Demand Growth at 7.8% for 2010, Combined with Rise in Occupancy Rates, RevPAR Gain Forecasted at 5.6% Increase for Year / December 2010

PKF-Hospitality Research Releases Hotel Horizons® Forecast Accuracy Assessment; Lessons Can Be Applied To 2011 Budgeting Process / June 2010

PKF Hospitality Research Updates Forecast to Show U.S. RevPAR Growth of 1.7% in 2010 While Profits Will Contract 1.4% / May 2010

Bottoms Down: New PKF Hospitality Research Survey Results Show Hotel Profits Declined a Record 35.4 Percent in 2009; Greatest Annual Decline Since Tracking Began in the 1930's / May 2010

U.S. Hotels Should Enjoy Double-digit Revenue Growth by 2012 According to PKF Hospitality Research / March 2010

2010 Will Continue to be a Tough Year for U.S. Hotel Owners and Operators; 2010 U.S Lodging ADR Now Forecasted by PKF at Minus 1.5% from 2009 ADR / December 2009

To search Hotel Online data base of News and Trends Go to Hotel.OnlineSearch

Home | Welcome | Hospitality News
| Industry Resources

Please contact Hotel.Online with your comments and suggestions.