timberland boots in usa Building boom now bringing empty rooms
About 1,000 hotel rooms, more than half in the Akron area, went into eastern Ohio along the I 77 corridor as the short lived oil and gas boom added spark to the resurgence of hotel development in the region. But many of those rooms checked in just as the fracking boom was checking out.
As the gusher of field hands, engineers, supervisors and vendors ebbed, hotel occupancy and rates fell as the room supply increased.
Sean Leatherman, senior vice president for corporate development at family owned American Hospitality Group based in Wadsworth, called the situation “a case study for how developers in the hotel industry get it wrong.”
“When gas and natural gas prices climbed eight years ago and fracking began, we had a gradual build up of business in Ohio and Pennsylvania,” he said. “There was a lot of demand in areas that did not have it previously. It suddenly became a place to develop hotels. We count 16 new hotels from South Canton to Fairlawn, when the market probably needed six or eight. Then we had the drop in demand, not just in the oil and gas business, but from the hundreds of other businesses that tie into them.”
Statistics from Hendersonville, Tenn. based STR Global tell the tale.
In the Akron area, STR reports occupancy fell to 54% in 2016, compared to 57% in 2015. Revenue per available room fell 4% in 2016 to $49.70 from $51.68 the prior year. Despite the headwinds, however, average daily rates remained a bright spot, climbing 2.3% to $92.22 in 2016 from $90.17 in 2015.
In Canton, STR reports occupancy was flat at about 54% the last two years following a drop from 61% occupancy in 2014. Meantime, revenue per available room dropped by less than 1% to $50.43 a room in 2016 from $50.51 in 2015. Average daily rates climbed to $92.72 last year from $92.35 in 2015.
Canton area revenue per available room particularly shows the sector’s rise and decline, for STR reports it was at a high of $58.48 a room in 2012, a 16% increase from $50.61 the prior year. That’s the kind of spike that beckons hotel developers the same way an oil find calls oil drillers.
president of North Canton based DeHoff Development Co., said his firm’s DeHoff’s Hilton Garden Inn in Green feels the impact of the decline in business from the additional hotel rooms more than the slowdown in drilling for new wells.
“We benefit from visitors generated by businesses located in southern Summit County and even more so by those in northern Stark County,” DeHoff said of the hotel at 5251 Landmark Blvd. “It’s a cyclical market, so now it’s a down market. Our Hilton opened in 2007. We had a long run of nice demand and nice rates. We’re still getting those, but boy have things changed.”
Likewise, Leatherman said his firm’s properties in Wadsworth felt little impact from the slowing of the fracking business. Its new Holiday Inn Express in Montville Township in Medina County near I 71 is even exceeding expectations. The firm’s Cambria Hotel and Suites Akron Canton Airport, 1787 Thorn Drive in Green, feels the loss of the oil and gas business more than its other locations, but still benefits from travel created by area businesses and residents.
“Demand is still growing,” Leatherman said. “It’s just going to take some time for the new supply to be absorbed. The good thing is that additional hotel development has stopped.”
Gregg M. Mervis, president and CEO of the Akron/Summit Convention Visitors Bureau, noted the 2016 downturn followed three years of increases in occupancy and rates in Summit County.
“We were fortunate,” Mervis said. “It could only continue as it did for so long. There were some segments in the market that did not come to fruition, which creates some of this adjustment. It’s a shame that oil and shale did not pan out to be what everyone hoped.”
Although the shale rush created an anomalous factor in Ohio, it also reflects the build and bust cycle of the lodging business, which is normal for the industry. Although there are more rooms to divide the revenue, overall hotel expenditures in the region continue to grow, STR reports.
Mervis said he thinks 2017 will be better than last year, although he described the expected growth as marginal. DeHoff said he has been surprised by the volume of business that motor coach tours produce. He also hopes the Hall of Fame Village at the Pro Football Hall of Fame will help occupancy, even though that plan includes its own hotel.
“In Stark County, we’re hopeful that the Hall of Fame Village will produce a pickup in business,” he said. “There are skeptics and real believers. You don’t know what imprint a $600 million project will have. If it does 50% of what they say it’s going to do, it will mean additional business.”
For his part, Leatherman said it boils down to needing to remain focused in a competitive environment.
“The name of the game is to do a super job on service and produce a good project,
” he said. “It’s just going to take a while for the business to come back.”