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The Great ND Hotel Rush

There's oil in them fields and hotels are sprouting up as fast as rigging operations.

Thursday, August 02, 2012
Alexandra Cooper
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What began as a quick fix to a spike in population growth has morphed into hotel development throughout the state of North Dakota—and it all began with the western area known as the “oil patch.”

Before 2009, there was minimal need for hotel development in North Dakota, says Bruce Ford, Senior VP of Sales for Lodging Econometrics. “For leisure or business, there has never been a need to have a bunch of hotels in North Dakota,” he says. “There would be maybe 5-6 hotels in a community but they would be isolated and not in high demand.”

However, the sharp spike in oil production throughout western North Dakota (now producing 600,000 barrels daily, just shy of Texas oil-production) forced hotel developers to move fast to accommodate North Dakota’s sharp population spike. “The first demand was for workers, people who needed to man the rigs,” Ford says. “But that was a problem in that North Dakota didn’t have hotels to house short-term people.”

Art Cahoon, chairman and CEO of Nakota Development, went to Williston, North Dakota two years ago, and saw the potential to develop several new properties. “I was in a community that planned to grow from 1,500 to 150,000, and they needed everything from restaurants to apartments to hotels. I chose the hotel sector.”

Cahoon selected Value Place because of its appeal toward extended stay guests and the fact that the brand required less maintenance than other short-term stay models. “We think that Value Place was the right choice for meeting the needs of people long term,” Cahoon says. The Value Place model strives to resemble an apartment rather than a hotel and comes complete with a full-service kitchen and guests pay a weekly rate as opposed to a daily.

The first two of Cahoon’s Value Place properties are set to open their doors within a week’s time. The properties are side-by-side and will work together and operate as one, creating a total of 248 new rooms for rig workers and whoever else has need for an extended stay room.

“Economy and midscale are the sort of properties can be built quickly and are aligned with the daily commute an employee is making. It doesn’t mean that nicer luxury hotels won’t be built later, but what you’ll see out there now are midscale and economy hotels,” Ford says. For Cahoon, Value Place was a sure-fit in an area like Williston.

Choice Hotel International’s brand, Sleep Inn has also seen great success throughout western North Dakota, says Mike Varner, senior director of brand strategy for the Sleep Inn, MainStay Suites, and Suburban Extended Stay hotel brands. “[Sleep Inn] works equally well when some of the light executives come in town all the way through the oil workers that are here for short to medium periods of time.”

For those staying for an extended period of time, Choice Hotels offers their MainStay property. “For oil workers staying for six-week shifts and longer, there is a great need to prepare their own meals,” Varner says. “It’s important to make it feel like their home away from home.”

For a city like Williston, that had never seen major hotel growth in the past, its streets and land became bustling with hotel construction and oil rig workers. “Williston had not seen a lot of growth until 2010,” says Sara Otte Coleman, director of North Dakota’s tourism division. “In 2011, there were three new hotels that opened, two more have already opened this year, and another six properties are scheduled to open.” Since 2010, over 225 rooms have been constructed in Williston alone, and 1,111 rooms are in the construction pipeline, according to Lodging Econometrics North Dakota Construction Pipeline statistics.

But Willison is not the only area seeing an increase in hotel development. With 26 projects in the pipeline, it is estimated that cities like Bismarck, Dickinson, Minot and Williston will see a 2,500-room increase starting in the next 12 months. “None of these places really had more than 1,000 rooms before, and now they’re going to have 5 to 6 new properties,” Ford says.

Choice Hotel’s largest Sleep Inn, located in Minot, is now just shy of 200 rooms. Since the oil boom, developers have approached Varner and his team about expanding the property. “From the day they opened, they’ve been sold out to pretty much exclusively oil workers.”

But with a statewide unemployment rate of 3 percent (the lowest in the country), hotels with success in the oil patch are now looking to other areas of North Dakota where expansion and profit are possible. “Development was definitely triggered by the increase in oil activity,” says Paul Lucy, director of North Dakota’s economic and finance division. “But we feel like we have a lot of other reasons for people to visit North Dakota than the oil patch.”

Varner says he has already seen spill-over into other markets throughout the state. “A wide variety of developers come to us because the entire economy in North Dakota is very strong. Fargo isn’t in the oil belt but properties there benefit from the state’s overall economic strength and overall low unemployment.”

Lucy says that he expects this spike in hotel development to spread statewide as North Dakota begins to flourish as one of the most economically steadfast states in America. Says Lucy, “Now that people are more aware of North Dakota for tourism and our strong economy, we think that people are going to pay more attention to us.”
Alexandra Cooper
Hotel Interactive® Editorial Division
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