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Tucson Hoteliers Took a Hit in 2009 With Fall in Revenues
by $70 million and Occupancy Down 7.8%

By Ian Friedman, The Arizona Daily Star, TucsonMcClatchy-Tribune Regional News

Feb. 14, 2010--Tucson tourism took a major hit in 2009 as hotel revenues fell by more than $70 million, to their lowest level since 2004, a new report by a national travel research firm shows.

But the early signs in 2010 are more positive, say several local hotel managers.

Hotel occupancy fell 7.8 percentage points here last year from 2008 levels, down to an average of 53.4 percent, says the Smith Travel Research report.

The average daily room cost dropped nearly $11, to $90.19 a night. Total hotel revenue fell to about $273 million.

Alan Klein, general manager of the Westward Look Resort and president of the Southern Arizona Lodging and Resort Association, said 2009 was hard on everyone, but the resort industry was hit especially hard because of the decrease in business and meeting travelers.

"The word 'resort' is something that has kind of been put out there that groups should stay away from because it carries a bad stigma," Klein said. "But in reality, the values that were out there in 2009 and 2010 probably won't be seen again for some time."

The stigma that the word "resort" now carries for business travelers, according to tourism experts, began in 2008 when AIG executives planned a retreat at a luxury California resort -- just days after the federal government committed $85 billion in taxpayer money to bail out the giant insurance company. The resulting public outcry, combined with the recession, has hurt the luxury-hotel business across the nation.

Will Conroy, president of the Arizona Inn, said the inn, which was built by his great-grandmother in 1930 during the Great Depression, has felt the recent slowdown, but he remains focused on trying to improve the economy in Tucson as a whole.

"We are just like any city; we are just right in the middle of a real deep recession and waiting to pull out of it," Conroy said. "We would all like to see it end sooner rather than later, but it seems very hard to predict."

Charles Wetegrove, general manager of Best Western Inn Suites Tucson Foothills, 6201 N. Oracle Road, said this past year put a lot of pressure on hotels to attempt to fill rooms by slashing prices and creating deals for customers.

"It is frustrating sometimes because you have to use your third parties to get the reservations in -- you know, Expedia, Travelocity and all of that stuff," Wetegrove said. "It brings your average daily rate down, and that is when things hurt your revenue."

Tucson had an occupancy rate of 67.8 percent in 2006, which was its highest rate in the seven years that were included in the report by Smith Travel, a Tennessee-based research firm.

Tucson's '09 occupancy rate was slightly above the overall state rate of 53 percent. Phoenix had an occupancy rate of 52.1.

Richard Vaughan, senior vice president of sales and marketing for the Metropolitan Tucson Convention & Visitors Bureau, said that while 2009 was historically bad, there are signs that both revenues and occupancy may rebound in 2010.

"Some of the companies and corporations are starting to improve, and when that happens people start looking again at business travel and coming back to meetings because they have to re-strategize how they move forward with their company objectives," he said.

Klein, Wetegrove and Conroy all said the early 2010 numbers are looking better.

"As the economy comes back and as people's confidence in business begins to rebound, meetings and conventions are going to begin to be planned again," Klein said. "This is a golden opportunity right now for business to begin to use hotels and resorts to hold their meetings."

As the industry begins to recover, raising room rates is not as much of a concern as increasing the overall occupancy rate, Vaughan said.

"Because (hotels) are having to provide deals and more value, it is going to be more difficult to drive rates, so they are going to really try and drive occupancy," he said.

The hope is that as occupancy increases, rates will be able to slowly follow suit.

"We have a very dynamic destination with the unique natural beauty elements and the world class resorts, spas, ranches, history and culture," Vaughan said. "Everybody can help because if people are going to take that one vacation, why not visit your family, friends and relatives and come to Tucson?"

Klein said this downturn will be quickly forgotten once the economy has fully recovered.

"The worst is over," Klein said. "For the tourism industry this was really tough; for the economy this was really tough. Tourism always recovers. After 9/11 we recovered, and after this recession we will recover."

DID YOU KNOW

To be economically feasible, a proposed $180 million downtown convention hotel for Tucson would need to be at 69 percent occupancy at average annual room rates of $163 in 2015, a city consultant, HVS Convention, Sports and Entertainment, reported Thursday.

That means the hotel would need one of the highest occupancy rates in the region.

Overall, Tucson's highest occupany rate in the last seven years was 67.8 percent in 2006, says research firm Smith Travel.

Hotel occupancy

Year Tucson Arizona

2007 66.3 percent 66.1 percent

2008 61.2 percent 60.2 percent

2009 53.4 percent 53 percent

Average room rate

Year Tucson Arizona

2007 $100.79 $105.54

2008 $101.05 $107.95

2009 $90.19 $95.13

Hotel revenue

Year Tucson Arizona

2007 $336 million $2.5 billion

2008 $343 million $2.4 billion

2009 $273 million $2 billion

Source: Smith Travel Research

Contact NASA Space Grant Intern Ian Friedman at friedman@azstarnet.com or 434-4083.

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Copyright (c) 2010, The Arizona Daily Star, Tucson

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