Tucson’s hotel industry took a beating during the Great Recession, and its slow recovery has been nothing to write home about.
Now things are really looking up, with an uptick in performance that started in 2015 projected to accelerate, and plans to add hundreds of new rooms downtown expected to buoy the local convention and meetings business.
Tucson-area hotel occupancy, average daily room rates and revenue per available room — a key measure of hotel operations calculated by multiplying average room rates by occupancy rates — all rose in 2016, with average rates rising about 7 percent and revenue per room jumping more than 9 percent, according to STR, a leading hotel market research firm based in Tennessee.
Nationally in 2016, room rates and revenue per available room grew about 3 percent.
And so far this year through August, daily room rates in Tucson were up more than 8 percent, while revenue per available room was up 13.8 percent, while nationally for the same period room rates rose just 2.1 percent and revenue per available room rose 2.7 percent, STR says.
“Any time you can experience that type of growth year over year, you’ve had really just an outstanding year,” said Brent DeRaad, president and CEO of Visit Tucson. “We’re optimistic that growth will continue, but probably not at that pace.”
DeRaad noted that STR has forecast a marketwide increase of about 5 percent in revenue per available room in 2018.
HVS, a hotel real estate firm, published a report in March citing faster growth in Tucson hotel rates and predicting continued growth this year.
Ryan Wall, a Phoenix-based director for HVS and co-author of the Tucson report, said improved performance among resorts, along with a general economic improvement, has helped lift the local market.
After lagging the overall market in in 2014 and 2015, Tucson’s resort submarket outpaced the overall market in 2016 with 5.6 percent growth in revenue per room, according to HVS data.
Russ Bond, general manager JW Marriott Tucson Starr Pass Resort & Spa, said Tucson still has a way to go but the improvement over the last two years is encouraging.
“We’re still not back to the ’07-’08 levels, but we’re making great headway, and 2018 is shaping up to be a great year for us,” Bond said, citing strong group bookings at Starr Pass for next year so far.
Bond, a vice president of the Southern Arizona Lodging and Resort Association, said a spate of endorsements for Tucson – including the 2014 UNESCO designation as the first U.S. “City of Gastronomy” have sent many travelers to discover the Old Pueblo.
“You can’t put a price on that, though you can’t actually track it,” Bond said. “If we get people to come here for the first time to give us a shot, then we have a pretty good chance of getting them to come back.”
DOWNTOWN HOTEL BOOM
A revitalized downtown and moves to add more than 600 new hotel rooms downtown will help boost the city’s conventions and meetings business, said HVS’s Wall, who is frequently involved in Tucson hotel appraisals.
The 136-room Marriott AC Hotel opened Thursday a few blocks north of the TCC, and the same developer has proposed a 100-room Marriott Moxy boutique hotel.
After years of delays, HSL Properties has proposed to renovate the shuttered Hotel Arizona adjacent to the Tucson Convention Center and reopen it as a 309-room hotel under a Hilton brand by 2019. And Scottsdale-based Caliber Hospitality wants to build a hotel with a minimum of 120 rooms just south of the TCC.
“Certainly, with additional rooms being built within a hop, skip and a jump of the Convention Center, I think it allows the city to go after bigger groups,” Wall said.
The SCOTTSDALE EFFECT
Outside of downtown, Tucson resorts including Starr Pass, Loews Ventana Canyon Resort and the Westin La Paloma Resort and Spa vie for convention business with high-end resorts in Phoenix and Scottsdale, Wall said.
The slow recovery of national meeting and group travel, coupled with the boycotts created by the immigration bill, SB 1070, had previously suppressed resort demand in Tucson, Wall said.
Starr Pass’s Bond said he’s not so sure Tucson resorts are dependent on overflow business from the Phoenix-Scottsdale market.
“We talk about it, but I’m not sure if statistically there’s really any data to support it,” Bond said. “I don’t think it’s necessarily a direct impact, because if you’ve chosen Phoenix or Scottsdale you’re willing to spend probably $100 to $150 in season more per room.”
For 2017 through July, Phoenix-Scottsdale resorts commanded an average daily room rate of about $257, compared with about $160 for Tucson resorts, according to data from STR and CBRE Hotels.
Bond said most Tucson resorts have completed major renovations in recent years — a key to getting return business.
Starr Pass updated its guest rooms and ballroom a few years ago and plans to redo its lobby, spa and Starbucks cafe by year’s end. La Paloma and Loews Ventana Canyon completed major renovations in 2013 and 2015, respectively.
The Hilton Tucson El Conquistador Resort last week marked the completion of the largest renovation project in its 35-year history, updating its 428 guest rooms and 139 casitas and adding new indoor and outdoor amenities.
FIXING AIR SERVICE
Market experts and local industry leaders agree on one thing: The lack of nonstop airline service to key cities, particularly on the East Coast, continues to hold back Tucson’s conventions and meetings business.
Efforts to remedy that were dealt a blow when American Airlines canceled a new nonstop to New York John F. Kennedy International Airport, resulting in the payment of $3 million in revenue guarantees by local backers, including most area resorts.
“Phoenix is an easy in and out,” Bond said. “Tucson continues to be a challenge from an airlift (standpoint), and it’s something we really have to get fixed if we’re really going to show robust improvement as we move forward.”
The Tucson Metro Chamber, Visit Tucson and the Tucson Airport Authority continue to lobby airlines for new nonstops, with New York and Washington, D.C., their top priorities.
“Our thought is, we don’t want to rush into anything specific right now, I think we’ll take our time, be deliberative with it, continue to have conversations with the larger carriers to see what we can pull together,” Visit Tucson’s DeRaad said. “There could be even a smaller carrier out there to that we could talk to about that.”
Meanwhile, the arrival of Caterpillar’s Surface Mining and Technology Division downtown with some 600 employees and plans by Raytheon Missile Systems, the region’s top private employer, to add some 2,000 employees will boost Tucson’s case for new nonstop airline flights and help fill the city’s hotels with business travelers, DeRaad said.
“One of the biggest deficiencies we have in the Tucson marketplace is the lack of corporate travel, and that’s just because of the lack of corporate headquarters,” he said. “Bringing in companies like Caterpillar and the Raytheon expansion, those are the kinds of things that help drive the need for more flights and also fill more hotel rooms on a regular basis.”