United States -  Tucson

Overview:

Tucson has been a market in transition in recent years as the local economy has been slower to recover than expected following the recession. While continued economic improvement is anticipated in 2016, growth is forecast to remain below historical levels given the cutbacks in federal government spending, the loss of MLB spring training demand, and the delayed recovery of the meeting-and-group segment. Nonetheless, the expected increases in government and group demand should help hotel operators improve performance dynamics in the near future. This sentiment has largely fueled hotel transactions in Tucson since 2014. Transactions in 2014 were highlighted by the sale of the Hilton El Conquistador ($15,000,000 or $35,047 per key) and the Loews Ventana Canyon ($33,458,961 or $84,068 per key), both of which are set to undergo extensive renovations in order to compete more favorably for increasing group demand in the market. The Embassy Suites by Hilton Paloma Village ($18,900,000 or $158,824 per key) garnered the highest price per key in 2015, largely attributed to its newer product, strong brand affiliation, and location in the desirable Catalina Foothills neighborhood of Tucson.

Furthermore, the presence of the University of Arizona (UA) continues to be a reason for optimism in the region. The University and its affiliated operations, the UA Tech Parks and University of Arizona Health Network, contribute over $8 billion in yearly economic impact to the state of Arizona. Major investments and collaborations by the institution continue to create positive momentum in the economy, including the recent merger between the University of Arizona Health Network and Banner Health. Starting in 2016, Banner Health plans to expand and renovate the academic medical center’s facilities over a three-year period, strengthening this crucial piece of the Tucson economy. Additionally, the Sun Link, a single-line streetcar system that connects Downtown Tucson to the University of Arizona campus, opened in July 2014. The Sun Link’s ridership has surpassed original weekly ridership estimates, as over 4,000 people ride the new rail line every week. As a crucial component of the downtown core’s redevelopment, the rail line is estimated to have already spurred $1.5 billion in public and private investments, including new housing, retail outlets, and restaurants.

New hotel projects in Downtown Tucson and near the University of Arizona campus are looking to take advantage of the area’s recent growth. A new, 150-room AC Hotel by Marriott (a European boutique brand) is scheduled to open in Downtown Tucson by 2017. Similarly, a mixed-use project near the Tucson Convention Center was approved by the Rio Nuevo Board in early 2015. The $100-million project will reportedly include a 140-unit hotel, an apartment complex, and a visual arts center. Meanwhile, a Residence Inn by Marriott is planned for a vacant lot in the Main Gate Square area of UA’s campus. The hotel, which would include a space for the UA University Club, is expected to break ground in 2016. Going forward, positive momentum in the Tucson economy is anticipated to increase the pace of the lodging industry’s recovery as hoteliers seek to return to pre-recession operating levels.

* The HVI is an index, a statistical concept reflecting a measure of the difference in the magnitude of a group of related variables compared with a base period. As such, it is a measure of broad market trends, rather than a conclusion as to the specific value of any asset, and cannot be applied to an individual asset. A good comparison is the Consumer Price Index. While this index provides a reliable measure of the overall rate of inflation in a region, it does not indicate how the price of milk has changed at your grocery store. So how can the HVI be of use to an individual investor? 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.

Valuation Trends and Predictions:

Tucson United States
Previous Year +3% (16 of 71) +1% (49 of 71)
Growth in 2017 0% (57 of 71) +2% (36 of 71)
Growth in next 3 years +7% (50 of 71) +10% (36 of 71)

Change In Value For Market:

Tucson RevPAR % Change

For more information, please contact:

Ryan Wall
rwall@hvs.com
  • +1 608 658-0587 (w)