Penn State recently hosted the state basketball finals for a couple of years after they had been at Hershey for decades. But that attempt failed, mainly because attendances dropped. So they were moved back to Hershey where attendances again increased. Hershey knows how to attract and entertain folks. And they do an outstanding job in hosting the PIAA. That is what they are all about - one of the best in the country at doing that - hard for a college or community to come close to them.
Penn State actually hosted the BB championships for 6 years (2007 thru 2012).
As for their return to Hershey, that was not due to attendance, or lack thereof, at PSU. People keep mentioning issues that are not a big concern to the PIAA with regards to the awarding of contracts for Championships.
As I mentioned previously, the PIAA puts the Championships up for bid every X number of years (X varies by the sport). For basketball, there was a bid in 2012, and it was for the next 4 years (2013 thru 2016). PSU put in a bid to continue hosting. The Giant Center (Hershey) also put in a bid. I forget if there were other bidders. Two things worked against PSU in their 2012 bid. First, the PIAA requires that the host commit to being available for their weekend of choice for each of the years of the contract. PSU was, at the same time, bidding to host a NCAA women's BB tournament regional contest. As such, they could only guarantee that the BJC would be available for the PIAA's weekend of choice for the 1st year of the contract. Secondly, the rent charge for the BJC in the bid was increased to nearly $100,000 for the event, which was considerably more than it had been over the previous 6 years when the BJC hosted the PIAA BB Championships. PSU also tried to tie their bid into a bid to also host the PIAA Wrestling Championships, but as I recall the PIAA likes to evaluate each bid separately, and not with any type of tie-ins. The PIAA awarded the contract to the Giant Center (Hershey), because 1) they guaranteed they'd be available for the weekend of choice for all 4 years, and 2) the rent charge for the event was around $25,000.
This past May, the PIAA examined bids for the BB Championships for 2017 thru 2020. Four locations submitted bids: Giant Center (Hershey), BJC (PSU), A.J. Palumbo Center (Duquesne Univ.), and Peterson Events Center (U. of Pittsburgh). The biggest thing working against PSU was that they only wanted a 2-year contract, while the PIAA RFP was for 4-year bids. I don't know any specifics about how the PItt and the Duquesne bids were evaluated, but the PIAA elected to award the Championships to Hershey.