Even with an ever growing supply of rooms, demand exceeded the new growth during 2000, which helped room revenue grow by 8.4%, according to Smith Travel, a Henderson, TN-based hotel industry research firm.

Another positive sign from last year, the overall occupancy rate for the year was 63%, up 1.1% from the prior year. The average room rate in the Valley also rose by just under 2% during 2000, up to $100.61, the Smith Travel survey showed.

Nationally, hotels had an occupancy of 63.5% in 2000, up 0.6%, and the average room rate roe by 4.9% to $85.24.

In spite of the robust number, some Valley hoteliers saw signs of weakness in the market. The slowdown in technology has taken some of the demand out of group business, say some Valley hotel managers. Intel Corp., Motorola and Avnet Inc. are among some of the giant technology companies with vast operations in metro Phoenix.

There is some optimism from hoteliers that the Valley hotel market will continue to recover. The harsh winter in the East and Midwest, and energy woes in California could bring additional visitors.

The turn around last year was a welcome respite from the past three years, when rates remained flat and the average occupancy declined slightly. Five years ago the average room occupancy was more than 70 percent. The market has fought to absorb a glut of new rooms, many of them in the form of limited service hotels, that have come onto the market in the past few years. More than 12,000 rooms were added to the overall inventory in the past three years, bringing the total to 50,600.

Mid-tier resorts were hit hardest by the new hotels added to the market. Those resorts, just below the luxury resorts in Scottsdale and Phoenix, saw an overall occupancy of 69% in 1998, but for the past two years have only hit 65%. Room rates for those hotels dropped 1.5% in 2000, says Richard Warnick, a Scottsdale-based hotel industry analyst.

Occupancy in the limited service hotels increased 5.5% during 2000, according to the Smith Travel survey, more than twice as much as any other hotel sector.

Not surprisingly, Scottsdale led the market in room revenue increases and highest average room rate. The upscale suburb saw an 11.3% increase in room revenue and an average room rate of $143.30.

Instant Insights /

Hotel Market Recovers in 2000, but Outlook Not as Optimistic

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