Hotel Online  Special Report

Warnick & Company


 
Arizona Lodging Insights
Third Quarter 2000

State of Arizona / Lodging Market Performance / 
Nine Months Ended September 30, 2000 vs. 1999


STATE OF ARIZONA

During the first nine months of 2000, as compared to the first nine months of 1999, state-wide occupancy and average daily rate (ADR) increased by 1.8 percent and 2.4 percent, respectively. The net effect was a very respectable increase in Revenue Per Available Room (RevPAR) of 4.2 percent. Arizona�s overall occupancy increased from 62.0 percent to 63.1 percent and ADR increased approximately $2.00, from $85.67 to $87.70. The increases were driven by supply and demand fundamentals that continue to improve. Demand grew by 5.5 percent during the first nine months of the year, while supply grew by only 3.7 percent. Most encouraging is the fact that demand growth is accelerating at the same time that supply growth is decelerating. The rate of growth in demand has increased from 2.4 percent during the first nine months of 1997, to 2.6 percent in 1998, to 4.4 percent in 1999, to this year�s 5.5 percent rate of growth. At the same time, the rate of growth in supply fell from 6.2 percent during the first nine months of 1997 to 3.7 during the same period in 2000.

Factoring Phoenix and Tucson out of the equation, things look even better. Occupancy in the balance of the state was up by 3.9 percent, from 59.6 percent to 61.9 percent, and ADR increased by 3.7 percent, from $63.20 to $65.55. The result was a RevPAR increase of 7.7 percent. As with the state as a whole, demand grew by 5.5 percent, but supply grew by only 1.5 percent.

All of the state�s geographic submarkets experienced RevPAR increases. Central Arizona, with a 12.6 percent increase, had the largest increase. It was followed by Southeastern Arizona at 10.3 percent. The Flagstaff and Western Arizona submarkets also achieved healthy RevPAR increases of 8.4 percent and 8.1 percent, respectively. RevPAR improvements in the balance of the state ranged between roughly 1.5 � 3.0 percent.

Among the different price segments (excluding Phoenix and Tucson), the RevPAR of the state�s Economy hotels increased the most � a very strong 7.9 percent. Occupancy in this segment increased by 4.4 percent and ADR by 3.4 percent. The performance was due to a 4.2 percent increase in demand coupled with a slight decline in supply. The Upscale sector, with a RevPAR increase of 7.8 percent, performed nearly as well. Here, occupancy increased by 5.4 percent and rate by 2.3 percent. The Mid-Price sector followed right behind with a RevPAR increase of 7.0 percent, mostly by virtue of a 4.8 percent rate increase. Last in terms of performance was the Budget segment with a RevPAR increase of 4.3 percent.

Collectively, the RevPAR of the resort hotels located in Phoenix and Tucson increased by just 2.4 percent. Occupancy was up 1.0 percent and ADR increased by 1.4 percent.


  Year to Date Occupancy %
For the Nine Months Ended 
September 30, 2000
 
1994
1995
1996
1997
1998
1999
2000
State of Arizona 69.2 70.5 68.6 66.1 63.2 62.0 63.1
Metropolitan Phoenix 71.1 72.7 71.8 69.9 65.6 62.7 63.3
Metropolitan Tucson 70.6 72.2 69.7 66.8 64.4 64.8 64.8
  Year to Date Average Daily Rate $
  For the Nine Months Ended 
September 30, 2000
 
1994
1995
1996
1997
1998
1999
2000
State of Arizona 69.62 75.06 81.04 84.38 86.07 85.67 87.70
Metropolitan Phoenix 77.51 85.97 95.24 98.27 99.95 98.86 100.63
Metropolitan Tucson 66.16 72.78 79.40 84.64 85.89 85.17 86.79

METROPOLITAN PHOENIX

Rooms demand in metropolitan Phoenix continues to grow at a phenomenal rate. During the first nine months of 2000, demand was up by 6.9 percent. In comparison, supply grew by 5.8 percent � still higher than any of us would like, but down from the 11.0 percent and 10.3 percent rates of growth during the first nine months of 1998 and 1999, respectively. The result was a 1.0 percent increase in metro Phoenix occupancy and a 1.8 percent increase in ADR, which combined to drive a 2.8 percent increase in RevPAR. Occupancy increased from 62.7 percent to 63.3 percent and ADR increased from $98.86 to $100.63.

All but one of the geographic submarkets in metropolitan Phoenix achieved RevPAR gains. Scottsdale led the pack with a 4.7 percent increase in RevPAR; ADR increased by 3.1 percent and occupancy by 1.6 percent. Scottsdale demand grew at a remarkable 8.5 percent. Nonetheless, supply woes continue to persist � during the first nines months of the year, Scottsdale�s supply was up by 6.8 percent. Not far behind the Scottsdale submarket were the Phoenix Airport and Phoenix East submarkets, where RevPAR increased by 3.5 percent and 3.1 percent, respectively. In the Airport market, demand was up by 6.9 percent, as compared to a supply increase of 4.6 percent. In the Phoenix East market, supply and demand growth were more balanced at 6.2 percent and 7.5 percent, respectively. In the Mesa/Chandler and Phoenix West markets, RevPAR was up only marginally. Tempe was the only submarket to see RevPAR decline. There, a 3.0 percent occupancy increase was more than offset by a 4.4 percent decline in ADR.

As with the submarkets, all but one of the price segments achieved a RevPAR gain. The Budget segment, where supply and demand growth were 3.2 percent and 9.2 percent, respectively, had the strongest performance, with a RevPAR increase of 7.2 percent. RevPAR performance in the remaining price segments, however, was relatively lackluster. The Mid-Price, Upscale, and Luxury segments saw RevPAR increases of between roughly 1 � 2 percent; in each case, substantial increases in demand were offset by nearly equal increases in supply. The Economy segment was the only segment to experience a RevPAR decline. Here, supply growth, at 1.4 percent, outpaced demand growth of just 0.4 percent. As a result, occupancy and rates both declined.

In the resort sector, RevPAR increased by 3.5 percent. However, all of the improvement was due to 5.1 percent RevPAR growth in the luxury sector, which was driven by a 5.3 percent rate of growth in demand. RevPAR for the non-luxury resorts in the Valley declined by 1.8 percent.

METROPOLITAN TUCSON

Tucson continues to be the state�s "constant." During the first nine months of 2000, RevPAR was up only 1.9 percent, due entirely to an increase in ADR. Occupancy remained the same, at 64.8 percent. Supply and demand in Tucson are nearly in balance, and there is little to say for each of them. Demand grew by a meager 0.7 percent and supply by just 0.8 percent.

Three of the four geographic submarkets in Tucson experienced RevPAR increases and one experienced a substantial decline. Central Tucson achieved a 5.6 percent increase in RevPAR, mostly because of improved occupancy. The Tucson East and Tucson North/West submarkets followed with RevPAR increases of 4.7 percent and 1.6 percent, respectively. The South/Airport submarket continues to be the laggard. RevPAR in this market declined by 4.3 percent, largely due to a 6.1 percent occupancy decline.

Two of the five price segments in Tucson experienced RevPAR increases, two experienced decreases, and one remained the same. The peak performer was the Luxury segment, where a 5.4 percent RevPAR increase was primarily driven by improved occupancy. The Mid-Price and Economy segments experienced RevPAR declines of 0.6 percent and 0.5 percent, respectively. In the Mid-Price segment, supply growth, at 3.8 percent, outpaced the rate of growth in demand of 2.4 percent. In the Economy segment, demand declined by 0.9 percent, while supply grew at a pace of 2.5 percent. There was almost no change in the Budget segment.

The Resort sector in Tucson achieved a 4.2 percent increase in RevPAR, the result of a 2.4 percent increase in occupancy and a 1.7 percent increase in ADR. There was no change in supply and demand grew by 2.4 percent.

Warnick & Company is a consulting, investment banking, and asset management firm that specializes in the hospitality and recreational real estate industries. Our talented team of experts is recognized for its ability to provided results-oriented, value-added services.


State of Arizona
Lodging Market Performance
Nine Months Ended September 30, 2000 vs. 1999
.
Occupancy
Average Daily Rate
Revenue Per 
Available Room
Supply and Demand
YTD 9/30/00
%
YTD 9/30/99
%
Percent Change
YTD 9/30/00
$
YTD
9/30/99
$
Percent Change
YTD 9/30/00
$
YTD
9/30/99
$
Percent Change
Percent Change
in Supply
Percent Change in Demand
Total Arizona
AZ - all markets 63.1 62.0 1.8 87.70 85.67 2.4 55.34 53.12 4.2 3.7 5.5
AZ - excluding Phoenix & Tucson 61.9 59.6 3.9 65.55 63.20 3.7 40.58 37.67 7.7 1.5 5.5
Submarket
Phoenix 63.3 62.7 1.0 100.63 98.86 1.8 63.70 61.99 2.8 5.8 6.9
Tucson 64.8 64.8 0.0 86.79 85.17 1.9 56.24 55.19 1.9 0.8 0.7
Flagstaff 67.0 64.1 4.5 58.60 56.48 3.8 39.26 36.20 8.4 0.0 4.5
Northeast Arizona 56.3 56.6 -0.5 56.75 55.27 2.7 31.95 31.28 2.1 2.6 2.1
Northern Arizona 62.6 62.5 0.2 76.00 74.91 1.5 47.58 46.82 1.6 0.6 0.7
Western Arizona 59.1 56.7 4.2 50.34 48.53 3.7 29.75 27.52 8.1 1.1 5.5
Central Arizona (not including Phoenix) 62.8 58.3 7.7 85.51 81.78 4.6 53.70 47.68 12.6 4.0 12.1
Southeast Arizona (not including Tucson) 63.4 60.0 5.7 53.31 51.05 4.4 33.80 30.63 10.3 0.1 5.7
Price Segments (does not include Phoenix or Tucson)
Upscale 63.9 60.6 5.4 89.23 87.25 2.3 57.02 52.87 7.8 1.8 7.4
Midprice 62.7 61.4 2.1 55.29 52.75 4.8 34.67 32.39 7.0 3.5 5.7
Economy 62.0 59.4 4.4 43.63 42.21 3.4 27.05 25.07 7.9 -0.2 4.2
Budget 58.4 57.4 1.7 34.74 33.89 2.5 20.29 19.45 4.3 -1.1 0.5
Resorts (Phoenix and Tucson only) 69.5 68.8 1.0 179.51 177.08 1.4 124.74 121.79 2.4 1.5 2.5
Source: Smith Travel Research

Warnick & Company is a consulting, investment banking and asset management firm
that specializes in the hospitality and recreational real estate industries.
###
Contact:
Warnick & Company
Phoenix:
6900 East Camelback Road, Suite 250
Scottsdale, Arizona 85251 
480.946.1888 Fax: 480.946.1999
Los Angeles: 
2250 East Imperial Highway, Suite 200
El Segundo, California 
90245 310.648.6798 Fax:310.648.6799
www.warnickco.com
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Also See: Arizona Lodging Insights/ Second Quarter 2000 / Warnick & Co. / Sept 2000 
Arizona Lodging Insights/ First Quarter 1999 / Warnick & Co. / June 99 
Arizona Lodging Insights / Year End 1998 / Warnick & Co. / April 1999

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