Hotels booming along with oil

By William Pack
San Antonio Express-News

Robust drilling activity in the Eagle Ford Shale is rescuing the state’s lodging sector.

San Antonio-based Source Strategies Inc. says in its newest Hotel Brand Report that hotels in the counties with the most oil-and-gas production were responsible for 75 percent of the $151.3 million in additional revenues hotels produced statewide between the first quarter 2011 and the first quarter this year.

That occurred even though those oil-and-gas-rich areas account for only 38 percent of the 395,100 hotel rooms in Texas. The rest of the hotel sector recorded insignificant revenue gains of 3.2 percent, according to the study released this week.

“The economic impact of oil and gas is huge,” said Bruce Walker, president of Source Strategies.

As surveyors, drillers and other oilfield workers poured into the largely rural counties that occupy the Eagle Ford, hotels quickly began to fill, RV parks multiplied and nontraditional residential sites called man camps appeared.

As occupancy rates rose in the area of the play, hotels could raise room rates and not worry about losing business. Even new hotels are filling up quickly, absorbing workers who were forced to live farther from drilling sites.

“Everything is full. If you wanted a room for something next year at this time, you’d have a problem getting it,” said Raymie Zella, city manager in Cuero, where one new hotel has just been completed and four others are under development. “I’ve never seen anything like it in my 30-something years in this business.”

“It really hit strongly in the first quarter,” Walker said. “In these areas, there are new hotels opening all the time.”

That there’s such a large number of new hotels makes sense with demand for places to live at levels high enough for developers to pay off their hotels in three to five years, Walker said.

In a separate study from the Brand Report, Source Strategies said room counts in 22 counties it includes in the Eagle Ford Shale grew by 5.1 percent in the 12 months ended March 31. Hotel revenues in those counties soared by more than 34 percent.

Statewide, room counts expanded by 1.5 percent and hotel revenues jumped by 8.5 percent over that time frame.

“We were in no way prepared for this kind of activity. We had no idea it was coming,” said Jay Watson, a real estate broker and president of the Cotulla-La Salle County Chamber of Commerce. “Everyone is looking for a place to live.”

A partnership called 2011 South Texas Lodges LLC is nearing completion on two of three extended-stay hotels it’s building in Three Rivers, Cotulla and Carrizo Springs. The ones in Three Rivers and Cotulla already are almost entirely leased.

Kevin Langston, one of the partners in the development group, said the company expected it to take up to eight months to fill the hotels, but demand — especially for properties like his that feature leases of six months or longer — has been unprecedented.

“With the amount of money that the energy companies are spending, we’re preparing for this to be a long ride,” Langston said.

Another indication of how strong hotel activity is in the Eagle Ford is found in Source Strategies’ listing of the top-performing hotels in the first quarter.

The top two hotels statewide based on an estimate of the daily room revenues are in Austin: the Four Seasons Hotel and the Driskill Hotel.

Coming in 19th was the Holiday Inn Express in Cotulla, a 79-room hotel open for less than a year that has a room revenue total of $163.43. That’s two places higher than the Mokara Hotel & Spa, San Antonio’s highest-ranked property.

The Best Western Park Heights in Cuero ranked 34th this year, up 144 slots from its ranking in last year’s first quarter and three places better than the Westin Riverwalk San Antonio.

Rates at Cotulla’s Holiday Inn Express were just under $210 a night this week, but there were no rooms available, officials at the hotel said. At a Holiday Inn Express in downtown San Antonio, meanwhile, a room was available for $124.95, about $85 less.

But officials said San Antonio-area hoteliers have benefitted from the Eagle Ford because they housed spillover workers who could not find hotels closer to work. The impact was felt more in some areas than others, however.

Hotels in the 78223 ZIP code, which runs along Interstate 37 north and south of Loop 410 South, saw occupancy grow by almost 8 points from the first quarter of 2011 to the first quarter this year, to 78.4 percent. Room revenues increased by almost 36 percent, Source Strategies estimated.

At hotels in the ZIP code covering most of downtown, meanwhile, occupancy jumped by less than half a point to 67.3 percent and revenues increased by 2.3 percent.

wpack@express-news.net

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