United States -  Phoenix

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The Phoenix hotel market (defined as Maricopa County and parts of Pinal County) continues to realize growth. While supply growth accelerated in 2018 because of several late-2017 and early-2018 openings, demand growth continued to outpace supply. As a result, the Phoenix market achieved nearly 70% occupancy, surpassing its pre-recession occupancy peak of 68.2% in 2006. Average rate (ADR) continues to achieve moderate growth as the local economy continues to thrive. Going forward, significant anticipated new supply is expected to exert downward pressure on market occupancy. However, ADR is forecast to continue to grow moderately given the strong local economy coupled with new, higher-rated supply.

In 2018, the Phoenix hotel market achieved the strongest demand growth since 2010. With roughly 101,000 new residents in 2018, and nearly 108,000 projected in 2019, Phoenix ranks among the fastest growing metro areas in the nation. Economic growth in the region has kept pace with the booming population, as indicated by relatively stable unemployment level. Given the significant number of resorts and other large meeting venues in the Valley, the meeting-and-group segment continues to support a healthy Phoenix lodging market. According to Experience Scottsdale, in-house meeting-and-group demand remained strong in 2018, and the outlook for 2019 is positive. Visit Phoenix reports that the number of conventions at Phoenix Convention Center increased slightly in 2018, although number of attendees was down. However, future bookings are strong for the coming years, with 2019 activity nearing last year's levels in terms of definite bookings and surpassing last year in definite attendees. The convention center remains on pace to increase both the number of conventions and number of attendees through 2021, which should benefit the overall market.

The number of new hotel projects in the Phoenix area has continued to increase as the market’s operating performance has improved. Development has spread from the region's top-performing submarkets to more secondary areas in the East Valley and West Valley. The Valley's most active submarkets, such as Downtown Phoenix and Downtown Tempe, continue to be the epicenter of new supply; however, focus in these submarkets has shifted from upper-midscale, limited-service projects toward upscale and upper-upscale, select- and full-service projects. Furthermore, Old Town Scottsdale, with its historically high barriers to entry, has received interest from developers. While new supply throughout the Valley is anticipated to result in modest occupancy declines, the entrance of higher-tiered products in core submarkets and new branded hotels in secondary submarkets should contribute to rate growth.

Transaction activity in Phoenix increased in 2018, with portfolio sales representing a significant portion of the increase. The sale of the Waldorf Astoria Arizona Biltmore for $400,000,000 represented the top single-asset and overall highest transaction last year. Average sales price per key (not including the Biltmore) remained relatively stable. Reported cap rates among non-portfolio sales also remained somewhat stable in 2018. Non-portfolio sales volume kept pace through the first quarter of 2019, with the sale of the boutique Clarendon Hotel in Central Phoenix representing the largest price-per-key transaction at just under $184,000 per room. 

* 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.

The widespread impact of the coronavirus (COVID-19) has had an unprecedented impact on hotels and hotel values worldwide. Consequently, the latest HVI analysis may no longer reflect the most current measure of lodging industry strength or the hospitality investment market.

In each of our offices across the globe, we are working tirelessly to analyze the impact of recent events and provide timely insights to help you navigate these uncharted waters. Because it is unclear how long the pandemic will last or how long related restrictions will be in place, we are updating our analyses on a weekly basis using the most current data.

Additionally, examination of value trends in prior cycles can provide useful information. Historical patterns, together with an understanding of the market’s current expectations for the eventual recovery of the industry and its performance, can provide insights on the likely trajectory of decline and recovery for hotel values.

For the Latest Information and Analysis on the Impact of COVID-19Click Here

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