Gosai takes more bearish stand on his hotels that cater to drillers
Tejas Gosai is shown during a 2014 interview in his office at Shale Media Group in Washington.
The Best Western and Holiday Inn Express hotels in Bentleyville that have been put up for sale by Tejas Gosai
Tejas Gosai was bullish on shale, and certainly wasn’t alone.
“I thought we would have 15 to 20 years of upstream drilling,” he said, reflecting back to 2004, to the advent of oil and gas development in Marcellus Shale. It started at the Renz No. 1 well in Mt. Pleasant Township.
“Things didn’t really get cranking until about 2010,” Gosai said of the industry. “I thought it would last until 2020 because of how crazy things were.”
They were crazy good things. Then they went crazy bad.
A surplus of natural gas suppressed prices in mid-2014, and has caused them to drop dramatically since. Prices remain low, and are forecast to stay there for at least another 18 months, forcing many drilling companies to shut down or severely curtail operations, imperiling others, and threatening supply chain industries.
Gosai is in the hotel business, a vital link in that chain. Hotels and motels provide temporary housing for roustabouts and other drill-site workers who, typically, toil at a site until it shuts down, move on to another elsewhere, and continue to follow that course.
When oil and gas production was going full bore, Gosai and his father, Kam, had full or near-capacity occupancy at the four motels they own. Then the downturn cut into their business, and now they are trying to sell three of them: the 83-room Best Western and 61-unit Holiday Inn Express in Bentleyville and a Holiday Inn in Monroeville.
Their Microtel Inn & Suites, off Racetrack Road in Chartiers Township, which caters more to the casino and outlet shopping crowd, is profitable and a keeper for now.
The hotel industry is among a number of links in that supply chain that have been weakening. Hotels nationally averaged 68.1 percent occupancy for the week ending May 14, according to STR, a Tennessee-based marketing firm that tracks hotel trends nationally and globally. That was down 2.9 percent from a year earlier.
The Gosais’ interests have been similarly affected.
“We lost maybe 25 percent occupancy in 180 days,” said Gosai, 35, a native of India who grew up in Charleroi and now resides in Venetia.
“For 10 years, we slowly went up to 90 percent and some nights we were over 100 percent capacity. We’d push guests to other hotels. Sadly, that isn’t happening now.
“We’re still at 65 percent, but we’re in an offseason, so this summer will be true test to see if our market is OK.”
Their short-stay Bentleyville facilities will go up for auction May 31. The Monroeville inn and property did not sell at auction April 19, and still belongs to the Gosais – for now. Bidding on the 185-room motel started at $4.5 million and ended at $10.9 million, which the Gosais rejected.
“That hotel is in a market that is not like the ones in Bentleyville or anywhere in Washington, Pa.,” Tejas said. “It has more rooms than our two hotels in Bentleyville combined. It’s just off the (Pennsylvania) Turnpike and we just renovated it for $2.5 million.”
He said the $10.9 million bid was below the break-even amount determined by an analyst for the Gosais, and that the high bidder wasn’t willing to go up. So the father and son said no.
The son, however, anticipates a strong June in Pittsburgh’s east suburbs. He said the Holiday Inn there “will do more than $800,000 in revenue” next month thanks to the U.S. Open golf tournament, which will be contested June 16-19 at nearby Oakmont Country Club.
The Monroeville motel has an advantage on the Bentleyville locations: banquet and bar/restaurant facilities. But they are being added at Big Jim’s Plaza, another Gosai property near the Bentleyville Best Western. Work there, according to Tejas, is about 90 percent complete.
Responding to the oil and gas surge several years ago, the Gosais made several driller-friendly changes at the Bentleyville motels. They added boot washers for drill-site workers, and to accommodate their many shifts, staggered housekeeping hours and offered breakfast throughout much of the day.
It was a strategy that paid off, and is still paying off. Gosai said oil and gas workers are still among the Bentleyville guests. Rice Energy, which is leasing land from the Gosais, is drilling nearby.
Tejas Gosai is more than a hotelier. He expanded his resume recently, becoming an underwriter for Smith Viceroy Capital, a hotel-related brokerage firm. Gosai operates Washington-based Shale Media Group, which oversees shale-related websites; a natural gas certification and commercial driver’s licensing center; and a compressed natural gas station, both in Bentleyville.
He is upbeat about the Bentleyville motels, but it is a cautious optimism.
“The fact is, we did very well there over many years,” he said. “Those hotels will continue to do well, but things won’t be as good as they were over the past 10 years.”