Article written by David Wichner Arizona Daily Star and originally posted here On May 5th, 2018
Tucson hotel occupancy rose 6.1 percentage points last year, and the average daily room rate rose 7 percent to $106.44 per night.
That strength continued in the first quarter including the high winter season, as revenue per room in Pima County rose 8.7 percent from January through March compared with the same period in 2017.
“We were certainly frustrated from 2012 through for the most part 2015, just with the slow growth we were seeing in Tucson lodging numbers in comparison with many other western cities,” said Brent DeRaad, president and CEO of Visit Tucson.
“In 2016 is when it really started taking off, and in calendar 2017, Tucson was one of the leaders in the U.S. in growth in RevPAR (revenue per available room), and we’ve gotten off to a very good start in 2018.”
Scott Dunn, a spokesman for the Arizona Office of Tourism, said leisure travelers helped keep the tourism industry afloat as businesses cut back on travel during the recession. Now, according to Dunn, they are adding to the resurgence as the economy improves.
“When there’s consumer confidence, people travel a lot more,” Dunn said.
Though tourism had rebounded statewide, Tucson’s growth in room revenue is impressive.
“It’s really tough to get that room rate back up once its dropped,” Dunn said.
The improving tourism picture also is reflected in related industries.
Last year, taxable restaurant and bar sales rose nearly 6 percent statewide and 4.8 percent in Pima County, according to data from the Arizona Department of Revenue.
And more visitors are flying to Tucson, as Tucson International Airport counted a 4.5 percent increase in total passengers as it continued to regain nonstop flights lost during the recession.
DeRaad said a combination of factors have contributed to the resurgence, including increased leisure travel and business meetings.
Though he didn’t have specific data, DeRaad said local resorts and full-service hotels have consistently told him that, since 2015, group business has grown steadily in room nights, rates and spending on food and beverages.
“We have more events, more leisure travel, a strong economy and then the meetings, it’s really just been a combination of those different factors,” he said.
The Tucson Gem, Mineral & Fossil Showcase was strong this year, with local hotels showing a 4 percent increase in revenue per room during its run from Jan. 26 to Feb. 11, according to STR research conducted for Visit Tucson.
The Arizona Bowl football game on Dec. 29 boosted revenue per room 27 percent and raised its direct economic impact 50 percent to $31 million and boosted revenue per room 27 percent, another STR study showed.
Once a drag on local tourism, downtown Tucson has become a mecca for visitors. The opening of the Marriott-run AC Hotel Tucson Downtown at 151 E. Broadway last fall and plans for additional hotels downtown are expected to bolster the convention business.
“The addition of the AC Hotel — the first hotel built downtown since the 1970s — has really helped pull up that downtown sector,” DeRaad said.
Local developer Scott Stiteler, a partner in the eight-story, 136-room boutique hotel, said downtown’s resurgence has given local hoteliers a major new selling point.
By sometime in 2019, Tucson is expected to have at least one more downtown hotel to serve the convention business.
Scottsdale-based Caliber Hospitality plans to break ground later this year on a $20 million, 125-room hotel adjacent to the Tucson Convention Center and is finalizing an agreement with a major brand to run it, CEO Chris Loeffler said.
Caliber has been investing millions in Tucson since entering the market a couple of years ago, when it bought the 167-unit Treehouse Apartments on North Campbell Avenue and spent more than $7 million renovating the property.
The company acquired the seven-story, 232-room Hilton Tucson East, 7600 E. Broadway, for $9.3 million in 2016 and completed a $10 million renovation project there at the end of 2017.
“We saw that there was a lot of opportunity in terms of the market in Tucson, and it’s so close to us, and I think there are good economic fundamentals in Tucson,” Loeffler said.
“Not only are we investors, but we are hands-on operators, we do our own construction, we keep the assets and we try to get integrated into the community so it’s a natural fit for us to be in Tucson.”
Loeffler said one rule of thumb is that at least 1,000 hotel rooms within walking distance are needed to make a convention center a success, and the city will approach that just with the new Caliber property.
“When you concentrate a lot of hotel rooms in one area, it allows us to attract a lot of other activities,” Loeffler said, citing the growth of downtown’s restaurant and bar scene.
Looking ahead, Visit Tucson’s DeRaad says he expects Tucson’s room-revenue growth rate to flatten but remain strong, noting that the addition of hundreds of new rooms could put downward pressure on occupancy rates.