Phoenix Hotel Market Diversity Is Good News for Recovery

The pandemic struck at the worst time for the Phoenix hotel market—during spring training and snowbird season. As expected and much like the rest of the country, the event devastated Phoenix hotel performance—but there is hope. While these two tourist groups are important to Phoenix’s travel industry, the market has diversified in recent years. Increased leisure travel and limited reliance on convention travel will help to fuel a swift recovery.

“In its favor, Phoenix, has a growing convention business and a steady number of international travelers, but those only make up a small potion of the areas overall visitors. It is more diverse. It isn’t reliant on a certain type of demand,” Branden White of Western Division of CBRE Hotels Advisory tells GlobeSt.com. “That should help to offer more flexibility moving forward compared to the other large markets.”

Julie Purnell of Western Division of CBRE Hotels Advisory agreed that a limited convention business would help the local recovery, particularly compared to larger markets. “Phoenix demand is well distributed and not reliant on that convention market. Our view is that the convention traveler, as one of the travel segments, will be the last to return because of the social distancing that is required going forward,” she tells GlobeSt.com. “Those very large conventions that fuel major cities, like Las Vegas and Anaheim, will probably take longer to recover than Phoenix, which is better distributed.”

A recent report from CBRE forecasts that Phoenix hotel demand will rebound by 2022 and RevPAR will return to 2019 levels by 2023. “Generally, the Phoenix market will mirror the national trends with a similar forecast of RevPAR recovering to near 2019 levels in 2023 and possible late 2022,” says White. “It is worth noting that the NFL Super Bowl is returning to Phoenix in 2023, which will provide a boost in the early part of that year.”

Purnell also noted that Phoenix rates would rebound faster than demand, which will impact RevPAR recovery. “We are forecasting that the ADR is going to return faster in Phoenix to 2019 levels somewhere between 2022 and 2023. It is the occupancy that is going to take longer to recover,” she says. “As a result, RevPAR will be led by ADR growth rather than occupancy growth.”

However, there are still some uncertainties. Phoenix has had a surge in coronavirus cases and businesses were forced to close, again. This event wasn’t included in the original report, and could alter the forecast. In addition, the snowbird population could be deterred from traveling in the future, which could also impact the recovery for hotels. “It will be interesting too to see if there will be noticeable changes in the snowbird traffic going forward, and if those dynamics will change at all,” says White.