Hotel growth anticipated for downtown Phoenix, report says

Sheraton, downtown Phoenix

[Source: Kasia Kowalczyk, Hoteliers Market Intelligence Report] — The onset of [significant downtown Phoenix] development activity has spurred the addition of several proposed hotels.  Downtown Phoenix has long awaited the addition of a new convention hotel, and the call will be answered with the opening of the 1,000-room Sheraton on October 1, 2008.  This city-funded project, which includes 80,000 square feet of meeting space, was budgeted along with the expansion of the Phoenix Convention Center, and the combined projects will be able to accommodate events that would have otherwise passed Phoenix by.  The hotel is one of Sheraton’s grandest undertakings and will be the largest hotel in the state of Arizona.  The Hotel Monroe, Hotel Palomar by Kimpton (as part of the CityScape project), and TWELVE Hotel and Residences are among the other high-end hospitality projects planned for downtown…

Generally, historical occupancy levels have shown steady increases since the market’s low point in 2001.  This growth is a result of record convention activity, increased air travel to the area, and the business of major institutions within downtown Phoenix.  Occupancy growth, which peaked in 2005, has been attributed to the city’s unprecedented expansion efforts over the last five years, as well as a relative undersupply of nationally branded hotel chains within the Central Business District.  Hoteliers look forward to the stronger occupancies associated with increased convention attendance.  Average rate growth in recent years has been significant as well.  This growth is due to strong demand in downtown Phoenix generated by the area’s development, especially from high-rated clientele associated with the biomedical research industry and commercial development activity.  Significant average rate increases noted in 2005, 2006, and 2007 were due to the influx in demand from many of the city’s law firms, banks, and development teams, as well as the positive national economic trends of the last few years.

Economic trends experienced on a national level in the latter half of 2007 and so far into 2008 have resulted in decreased business travel due to rising fuel prices, job losses, and corporate budget cuts. Although Phoenix is not necessarily sheltered from the impacts of these discouraging trends, the capital city benefits from a strong and stable government presence, new mixed-use development efforts that have already secured financing, and the imminent opening of the expanded convention center.  Thus, operating statistics for Phoenix hotels are expected to experience continued growth, but at a slower pace than in former years.  [Note: To read the full report, click here.]

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