Hotel Online Special Report Warnick & Company Arizona Lodging Insights Second Quarter 2000 State of Arizona / Lodging Market Performance / Six Months Ended June 30, 2000 vs. 1999
STATE OF ARIZONA
Arizona’s lodging industry appears to have turned the corner. During the first six months of 2000, as compared to the first half of 1999, occupancy, average daily rate (ADR), and the rate of growth in rooms demand were all up, while the rate of growth in rooms supply declined. Statewide occupancy increased from 64.9 percent to 65.8 percent, a 1.4 percent increase. ADR was up by 1.3 percent, from $93.54 to $94.76. The result was an increase in revenue per available room (RevPAR) of 2.7 percent.
Chart Index State of Arizona
- Supply and Demand Revenue Per Available Room Average Daily Rate Occupancy
- Supply and Demand Revenue Per Available Room Average Daily Rate Occupancy
- Supply and Demand Revenue Per Available Room Average Daily Rate Occupancy
Chart Index State of Arizona
- Supply and Demand Revenue Per Available Room Average Daily Rate Occupancy
- Supply and Demand Revenue Per Available Room Average Daily Rate Occupancy
- Supply and Demand Revenue Per Available Room Average Daily Rate Occupancy
During the first six months of 2000, the demand for hotel rooms grew at a very impressive 5.3 percent, up from the 4.2 percent and 2.2 percent rates of growth achieved during the first halves of 1999 and 1998, respectively. At the same time that demand growth is accelerating, the growth in the supply of new rooms is decelerating. During the first half of 2000, supply grew by 3.9 percent. This compares to supply growth rates of 7.1 percent and 7.0 percent during the same periods in 1999 and 1998, respectively.
Factoring Phoenix and Tucson out of the equation, occupancy in the balance of the state was up by 5.1 percent, from 57.0 percent to 59.9 percent, and ADR increased by 4.0 percent, from $61.26 to $63.72. As a result, RevPAR increased by a very healthy 9.3 percent.
Tucson, with a 0.2 percent decline, was the only submarket in Arizona that experienced a decrease in RevPAR. In every other submarket, RevPAR increased. Central Arizona and Flagstaff, with RevPAR increases of more than 12 percent, led the pack, while Phoenix had the lowest increase at only .07 percent.
Among the different price segments (excluding Phoenix and Tucson), the RevPAR of the states Economy hotels increased the most – a very strong 10.1 percent. Occupancy in this segment increased by 6.1 percent and ADR by 3.7 percent. The performance was due to a 5.5 percent increase in demand coupled with a slight decline in supply. The Upscale sector, with a RevPAR increase of 9.8 percent, was right behind. Here, occupancy increased by 7.7 percent and rate by 2.0 percent. Next in line was the Mid-price sector, where RevPAR increased by 7.9 percent. Last in terms of performance was the Budget segment with a RevPAR increase of “just” 5.2 percent. The collective RevPAR of the resort hotels located in Phoenix and Tucson increased by 1.4 percent. Occupancy dropped by 1.3 percent, from 78.7 percent to 77.7 percent. This was the result of a 1.4 percent increase in supply, coupled with a 2.7 percent increase in demand. ADR increased by just 0.2 percent, from $202.95 to $203.28.
METROPOLITAN PHOENIX
Demand growth in metropolitan Phoenix is best described as having been strong, stronger, and stronger yet. During the first halves of 1998, 1999 and 2000, the respective demand growth rates were 4.9 percent, 5.7 percent, and 6.7 percent. Very impressive! Better yet, the rate of growth in supply has fallen off sharply – down from 10.9 percent during the first half of 1999 to 6.4 percent in the same period this year. While still higher than any of us would like, supply growth is temporarily headed in the right direction. The result was a slight increase in occupancy and ADR. Occupancy increased from 68.2 percent to 68.4 percent and ADR increased from $109.88 to $110.32. The net effect was a 0.7 percent increase in RevPAR during the first half of 2000.
Four of the six submarkets in metropolitan Phoenix experienced RevPAR declines. Tempe, at minus 4.7 percent, decreased the most and Phoenix East, at minus 0.2 percent, was impacted the least. The Phoenix Airport and Scottsdale submarkets both achieved RevPAR increases, 2.7 percent in the first case and 2.8 percent in the second. Not surprisingly, these markets, at 7.9 percent and 9.8 percent, respectively, led the way in terms of demand growth.
RevPAR decreased in three of the five price segments. The Economy segment was hardest hit with a 5.4 percent decline. The Upscale and Mid-price segments followed with 1.2 percent and 0.7 percent declines, respectively. In the Luxury segment, where a small decline in rate was offset by a corresponding increase in occupancy, RevPAR remained constant. The Budget segment was the only price category to achieve an increase. Here, RevPAR increased by 5.8 percent, due mostly to a 4.8 percent improvement in occupancy. Demand growth in the Budget segment was a whopping 10.6 percent. It appears that some of that growth came at the expense of the Economy hotels, where demand decreased by 1.0 percent.
During the first half of the year, the Luxury resorts in the Valley increased their RevPAR by a respectable 4.8 percent. Occupancy was up 3.0 percent and ADR increased by 1.8 percent. Demand in this segment increased by a very strong 7.3 percent, much of which had to do with the opening of the Four Seasons Resort in north Scottsdale. In contrast, the nonluxury resorts in the Valley continue to be impacted by the increases in nonresort supply. The RevPAR for the Upscale and Mid-Price resorts fell by 3.4 percent during the first half of 2000, mostly as a result of decreases in ADR. Collectively, resort RevPAR in the Valley increased by 1.3 percent; occupancy increased by 1.3 percent and rate declined by a negligible 0.1 percent.
METROPOLITAN TUCSON
“Status Quo” summarizes the situation in Tucson. During the first half of 2000, RevPAR was nearly constant, down by just 0.2 percent. A 2.1 percent decline in occupancy, from 70.2 percent to 68.7 percent, was nearly offset by a 2.0 percent increase in ADR. Supply increased by just 0.1 percent while demand declined by 1.8 percent.
Three of the four geographic submarkets in Tucson experienced RevPAR increases and one experienced a substantial decline. Central Tucson achieved a 2.7 percent increase, mostly because of improved occupancy. The Tucson East and Tucson North/West submarkets followed with RevPAR increases of 1.5 percent and 1.0 percent, respectively. The South/Airport submarket, on the other hand, experienced a RevPAR decline of 5.9 percent, largely as a result of an 8.1 percent decrease in occupancy.
Four of the five price segments in Tucson experienced RevPAR declines. Worst hit were the Mid-price and Budget segments, with 2.7 percent and 2.6 percent RevPAR decreases. Following these were the Economy and Budget segments, which experienced RevPAR declines of 2.0 percent and 1.3 percent, respectively. Most of the problem in these segments is attributable to declines in demand that ranged between 0.6 percent and 5.5 percent. The only price segment with positive performance was the Luxury segment, where RevPAR increased by 4.3 percent; ADR in this segment increased by 4.2 percent and occupancy by 0.1 percent.
The Resort sector in Tucson achieved a 2.7 percent increase in RevPAR, the result of a 1.2 percent increase in occupancy and a 1.5 percent increase in ADR.
State of Arizona Lodging Market Performance Six Months Ended June 30, 2000 vs. 1999. Occupancy Average Daily Rate Revenue Per Available Room Supply and Demand YTD 6/30/00 % YTD 6/30/99 % Percent Change YTD 6/30/00 $ YTD 6/30/99 $ Percent Change YTD 6/30/00 $ YTD 6/30/99 $ Percent Change Percent Change in Supply Percent Change in Demand Total Arizona AZ – all markets 65.8 64.9 1.4 94.76 93.54 1.3 62.35 60.71 2.7 3.9 5.3 AZ – excluding Phoenix & Tucson 59.9 57.0 5.1 63.72 61.26 4.0 38.17 34.92 9.3 1.6 6.8 Submarket Phoenix 68.4 68.2 0.3 110.32 109.88 0.4 75.46 74.94 0.7 6.4 6.7 Tucson 68.7 70.2 -2.1 95.78 93.92 2.0 65.80 65.93 -0.2 0.4 -1.8 Flagstaff 61.0 57.0 7.0 55.19 52.68 4.8 33.67 30.03 12.1 0.0 7.0 Northeast Arizona 52.1 51.5 1.2 52.65 51.20 2.8 27.43 26.37 4.0 3.2 4.5 Northern Arizona 53.2 51.5 3.3 69.80 69.18 0.9 37.13 35.63 4.2 0.6 3.8 Western Arizona 62.5 59.1 5.8 50.93 49.56 2.8 31.83 29.29 8.7 0.8 6.4 Central Arizona (not including Phoenix) 63.5 59.6 6.5 86.52 82.18 5.3 54.94 48.98 12.2 4.7 11.5 Southeast Arizona (not including Tucson) 65.4 62.4 4.8 53.79 51.56 4.3 35.18 32.17 9.3 -0.1 4.7 Price Segments (does not include Phoenix or Tucson) Upscale 60.0 55.7 7.7 87.52 85.83 2.0 52.51 47.81 9.8 2.0 9.9 Midprice 61.0 59.4 2.7 53.56 50.97 5.1 32.67 30.28 7.9 3.1 6.0 Economy 58.9 55.5 6.1 41.70 40.21 3.7 24.56 22.32 10.1 -0.6 5.5 Budget 58.7 57.7 1.7 34.86 33.73 3.4 20.47 19.46 5.2 0.0 1.8 Resorts (Phoenix and Tucson only) 75.5 74.6 1.3 203.28 202.95 0.2 156.48 151.32 1.4 1.4 2.7 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 Also See: Arizona Lodging Insights/ First Quarter 1999 / Warnick & Co. / June 99 Arizona Lodging Insights / Year End 1998 / Warnick & Co. / April 1999