United States -  Phoenix

The Phoenix hotel market (defined as Maricopa County and parts of Pinal County) realized continued improvements across all performance metrics in 2016, with occupancy reaching approximately 67% for the first time since 2007, due primarily to a strengthening local economy that is more closely resembling its pre-recession self. Despite higher occupancy levels, average rate struggled to make a more substantial year-over-year increase in 2016 given the departure of one-time Super Bowl demand from 2015. Looking to 2017, the Phoenix market is forecast to experience continued RevPAR growth, primarily through ADR increases. However, year-over-year RevPAR growth is anticipated to temper somewhat over the near term, as new supply will likely test some of the region’s most active submarkets, including Downtown Phoenix, Tempe, Scottsdale, and Chandler. Nevertheless, the region’s growing economic diversity, coupled with strong increases in population and employment, should help the Phoenix hotel market avoid pitfalls experienced during prior cycles.

The Phoenix hotel market experienced further demand increases in 2016, despite the departure of one-time Super Bowl demand, which brought significant transient and group demand to the market over a four-week period. This encouraging trend was aided by continued increases in transient leisure demand during the market’s peak seasons (January through April), as well as increased commercial activity throughout the Valley. Given the high number of resorts and other large meeting venues in the Valley, the meeting and group segment continues to be the key to a healthy Phoenix lodging market. By all accounts, in-house meeting and group demand appears to be strong again, with some modest corrections realized in early 2016 because of the exodus of one-time Super Bowl demand from 2015. While the Phoenix Convention Center experienced a relatively flat year in terms of events and attendees, it remains on pace to make further strides in both categories in 2017, which is considered encouraging for the overall market.

The number of new hotel projects in the Phoenix area has steadily increased in recent years as the market’s operating performance has improved. These new projects span from limited-service hotels to resorts, and continue to be largely concentrated in the region’s most active submarkets, such as Downtown Phoenix, Downtown Tempe/ASU, Chandler Price Road Corridor, and Scottsdale/Paradise Valley. These submarkets enjoy the presence of strong commercial bases, coupled with existing/planned facilities and amenities to attract leisure and group travelers. While new supply is expected to moderate operating performance in the near term, these robust submarkets should prove resilient over the long term given the number of planned commercial and/or leisure oriented developments in the respective areas.

Transaction activity across Phoenix slowed in 2016. The sale of the Royal Palms Resort & Spa in June 2016, for $88,250,000 per room, represented the top single-asset sale last year. While investor interest in Phoenix continues to be strong, a gap between seller expectations and buyer desires still exists given that hotel performance is finally back above pre-recession levels. Nonetheless, sales activity is likely to hold steady in 2017, with buyers being more selective given the anticipation of new supply throughout the market.

* Although the HVI cannot tell you what a particular hotel is worth, it does provide excellent “big picture” data, indicating which market areas are experiencing positive trends, and thus may present good investment opportunities. The HVI for the U.S. is a measure of the strength of the lodging industry as a whole and, specifically, the hospitality investment market. The HVI for the various identified markets can provide a basis to evaluate and compare different geographic regions. For more insight on the limitations and applicability of the HVI, please read the message on the HVI home page by clicking on the graphic at the top of this page.

Change In Value For Market:

Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: Less than -10%

Phoenix RevPAR Change

Phoenix RevPAR

Year RevPAR
2006 77.14
2007 80.81
2008 73.77
2009 55.27
2010 55.94
2011 60.18
2012 61.12
2013 64.87
2014 71.52
2015 74.77
2016 82.67
2017 85.59
2018 (f) 87.31
2019 (f) 87.35

For more information, please contact:

Adam Lair, MAI
  • +1 415 896-0868 (w)
  • +1 504 231-2651 (m)
Michael Smithson
  • +1 214 629-5909 (w)