Hotel Market to Get Sunnier in 2001

PHOENIX-Next year could be rosy for tourism and the hotel industry if consumer confidence can be buoyed and recession can be staved off.

In 2001, hotel occupancy should rise slightly and room rates should rise by 3%, says Rich Warnick, head of Warnick & Co., a Phoenix-based hotel analysis firm. “If there’s a recession you can expect to see that hotel occupancies are going to drop off,” he says.

Those predictions all go by the wayside if the recession is longer and deeper than expected.

The past year saw the Valley finally absorb the glut of rooms that have come onto the market in the past five years, mostly in the form of limited service hotels. The Valley also saw an increase in the number of visitors.

Through to the start of the fourth quarter, demand for hotel rooms in the Valley was up 6.9%, while the supply of rooms rose 5.8%. That comes out to an overall increase in occupancy of 1percent.

Average daily room rates also increased by 1.8%, according to Warnick. By comparison, the room supply grew by 11% through the three quarters in 1998 and by 10.3% during that same time in 1999.

KSL Recreation Corp., which purchased the Arizona Biltmore last week for $335 million, expect 2001 to be a good year. The new ownership expects occupancy to increase by at least 3% and rates to move as high as 5%, says Scott Delacio, KSL resort division president.

The two major resort projects now under way—Marriott Corp.’s 1,000-room resort in Desert Ridge and the 850-room Westin in Kierland–won’t be adding any resort rooms soon. Both projects are expected to be completed late in 2002.