In Texas Drilling Country, Oil Plunge Means Too Many Rooms at the Inn

by The Texas Tribune

COTULLA — Sitting behind the front desk of the barracks-style motel they own on this South Texas town’s Main Street, John and Carolyn Nelson had plenty of time to chat. As a recent weekday afternoon turned to evening, no guests had checked in.  

“We’re completely empty right now,” said John, 68, pushing aside the remnants of a dinner featuring orange sauce as a TV Land rerun flickered on a television.

More than two dozen vacant rooms, little work for their bare-bones staff — the couple said they have grown used to this in recent months, staying afloat almost solely thanks to a dry-cleaning business on the same property. But life wasn’t always this slow in this town, about 90 miles southwest of San Antonio. Far from it.

From 2009 through most of 2014, Cotulla rumbled amid drillers’ mad dash to the oil-rich Eagle Ford Shale. Business boomed for anyone who offered beds to the thousands of workers coming to town. Competitors sprouted like weeds after the rain, sometimes charging sky-high rates for a small town.

The town, population roughly 4,000, built 20 new hotels. Before the boom? It had just four, including the Nelsons’ 60-year old Cotulla Motel.

Now a dramatic plunge in oil prices has meant crashing revenues and rising angst for the outsized hospitality industry, continuing a time-honored tradition in Texas drilling communities.

West Texas communities, which have boomed and busted throughout their oil-fueled history, have seen this before. In the 1980s, hotel revenues leaped and dipped like a ballet dancer. But for Cotulla and other towns new to crude dependence, this is their first taste of that tradition.

“That’s what’s happened before, and what’s happening now,” said Todd Walker, senior vice president of San Antonio-based Source Strategies, a hotel industry consultant. “They don’t have enough rooms when it’s booming. Then they build a bunch of rooms, and they’ve got too many rooms.” 

Though hardly the only sign of trouble in Cotulla, the empty hotel parking lots here are providing some of the most prominent symbols of the economic whiplash volatile oil prices have inflicted on oil towns scattered not only across Texas but also in Oklahoma, Louisiana, North Dakota and beyond.

Change in hotel revenues from 2010-2015

In drilling counties, hotels are riding the oil industry’s fast-moving roller coaster of prices.

  • Texas overall
  • Permain Basin shale counties
  • Eagle Ford shale counties

2014-2015

Texas Overall:   3.3%
Permian Basin shale counties: -15.8%
Eagle Ford shale counties:  -18.6%

2013-2014

 Texas Overall: 9.4%
Permian Basin shale counties: 19.9%
Eagle Ford shale counties:  12.2%

2012-2013

 Texas Overall:  8.7%
Permian Basin shale counties:  7.9%
Eagle Ford shale counties:  16.4%

2011-2012

 Texas Overall: 9.9%
Permian Basin shale counties: 36.5%
Eagle Ford shale counties:  24.8%

2010-2011

 Texas Overall:  12.9%
Permian Basin shale counties:  40.5%
Eagle Ford shale counties:  21.5%