Oil And Gas Fuels Colorado's Hotel Construction Boom

Oct 7, 2014

Hotel construction across the U.S. has been on a tear in 2014. The number of rooms being built is up almost 50 percent compared to the previous year. In Colorado, the demand is partially fueled by the oil and gas boom along the state's eastern plains. But if history is any guide a bust usually follows a boom.

So how long can the building go on? What are developers doing to prepare for that change?

Drive along Interstate 76 to Colorado's eastern plains and you'd be hard-pressed to find a hotel room in the middle of the week, especially around the town of Fort Morgan. A no frills room in Sterling can cost you $100 a night or more due to demand outstripping supply.

You don't have to tell that to developer David Amin. He figured out that something was changing back in 2009, when he was running the front desk at his father's hotel in Fort Morgan.

"I'm sitting at the Day's Inn and I get a call. 'I need 30 rooms for Halliburton,'" recalled Amin. "And I said 'Ma'am, I don't have 30 rooms for Halliburton. I don't have 30 rooms to sell.' And she said, 'What if I take them for the next six months?'"

Amin didn't have the inventory. Even though Colorado was in the midst of a deep economic recession, he knew where his next business venture would be.

"I said, 'There's something going on in Colorado that most of the populace has no clue about. I need to act on this opportunity.'"

In 2013, Amin opened the Hampton Inn in Fort Morgan, an upscale hotel on the same grounds that his father's hotel used to occupy. It's sometimes referred to by locals as "Halliburton Inn" because it houses so many oil and gas workers who live outside the region but work in the nearby fields.

Amin is building a hotel in Greeley and has plans to build another in Sterling — two out of about 50 hotel projects that are being planned or in the midst of construction across the state.

Despite the recent addition, hotel rooms are still tight along Interstate 76.

A sign at the Econo lodge in Brush, Colo. Brush takes care of overflow when Fort Morgan hotels are full. But on some weekdays, even Brush hotels are maxed out.
Credit Grace Hood

Kari Linker, executive director of Morgan County Economic Development Corporation, said the effect of new hotels on Fort Morgan's economy is potent.

"When you have a hotel shortage as an economic developer, it means the economy is spinning, dollars are being spent. It's a good thing," she said.

The other part of the economic equation for Morgan County, said Linker, is convincing oil and gas businesses to put down longer-term stakes in her area.

"You want the families and you want the Halliburton offices here, and those paychecks to stay here," she said. "Because right now when you don't have it, a lot of those paychecks go back to where those employees live. We want the paychecks here."

Right now housing is tight in Fort Morgan, said Linker. In an email, Halliburton told KUNC while it has a presence there, its main operational hub remains in Fort Lupton 60 miles away in southern Weld County.

All this places ongoing demand for more hotel rooms along the eastern plains.

Geoff Davis, president of Hospitality Real Estate Counselors, a company that connects buyers and sellers of hotels, said cheap access to capital is fueling the rise of hotel construction projects across the country. Near oil and gas sites where not much else going on, he said potential buyers need to be careful about the long-term prospects of the properties.

"What we've seen is that level where you're running 90 to 100 percent occupancy is not sustainable over the long term," he said. "If you're on the front end of this you can do quite well. Then you have to look at what the asset will be like down the line, and what the more normalized profit-loss statement looks like."

Colorado hotel developer David Amin said for him, the boom is just a part of the picture. Even if oil and gas prices drop, Amin believes there are other economies like agribusiness that he can bet on for the future.

"There's a lot going on in Colorado based on the location of the state, the resources we have, and the workforce we have," he said.

Amin doesn't see hotel construction slowing down anytime soon. Construction at his Greeley and Sterling hotels is expected to be complete in 2015.