• The City of Tucson just doubled the $1 nightly surcharge on visitors’ overnight stays, which guests pay on top of a 6 percent nightly bed tax and 8.1 percent sales tax putting Tucson behind only Denver for having the second highest bed tax rates of any city in the western United States.
• At the same time, the city reduced the amount of money from the bed tax that goes to the Metropolitan Tucson Convention and Visitors Bureau (MTCVB) for marketing and attracting tourists.
 The Hampton Inn across Wilmot Road from Park Place Mall is scheduled to open later this year. Joe Pangburn photo |
• Region-wide, RevPAR - revenue per available room - is down 15 percent over the past year due in large part to the global economic recession.
And, as if all those weren’t enough, by the end of this year nearly 700 new rooms in five new lodgings will come on line. That’s the most new rooms that have been added in any one year since 1996 when there were 893. The lodgings will increase the region’s 16,030 total available rooms at the start of the year by 4 percent.
Then next year, another four hotels are slated to be completed, adding nearly 400 more rooms.
Compare those numbers to 2008 when 217 rooms were added to inventory in two new hotels.
The boom in hotel construction can be traced to a hotel industry conference in 2005 where the Tucson market was identified as being underserved.
“Within months, every major hotel chain was calling asking about sites,” said Jerry Hawkins, first vice president with CB Richard Ellis. “It’s a good thing it wasn’t easy to find sites in town or we could have been looking at a lot more coming online right now.”
All indications pointed to starting construction as the right decision according to data from the MTCVB. From 2002 to 2007, Tucson’s average room rate increased nearly 26 percent, the number of occupied rooms was up nearly 19 percent, the occupancy rate was closing in on 70 percent (up from 59 percent in 2005) and RevPAR was up more than 40 percent.
Then the downturn came in 2008. Tucson’s average room rate increased just 50 cents and the other measures were down from 6 to 7 percent.
“Currently (year to date) we are 15 percent below last year and it will be a struggle the rest of this year due to overall reduction in business and leisure travel,” said Rick Vaughan, senior vice president of sales and marketing for the MTCVB. “We are more optimistic for 2010 and seeing activity pick up for future years; 2010 will be a rebuilding year with some positive results with a more robust travel and convention market shaping up in 2011 and 2012.”
“It is difficult for these places to adjust to slower times,” said Mike Chapman, first vice president with CB Richard Ellis. “You have your staffing, but you really can’t cut too much there because daily business can pick up quickly and you can find yourself short-staffed.”
The TownePlace Suites by Marriott, 6595 S. Bay Colony Drive, opened earlier this month near Tucson International Airport. The property is Marriott’s extended-stay brand.
General Manager Matthew Hallinan knows summers are not usually kind to tourism in Tucson, let alone the drop in travel around the globe.
“We are using these first three months as our ramp-up period,” he said. “We’re working to get our name out there and then also to focus on the guests we do have. We want to hear from them, what they need from us. There are lots of choices here by the airport and all of them have a bed, all of them have a computer or some kind of internet access. But we really want to cater to the people we have and really take care of their needs.”
The falling market statistics and the 192 hotel properties in the region, show the market is saturated with new properties now, Hallinan said.
“But that’s part of development and growth and bringing Tucson up to speed on things and get some newer accommodations in town,” he said. “The type of people Tucson wants to get to come here are those who are well-traveled. Those types of people typically don’t stay at a mom and pop hotel or motel. They like to see the brands they know.”
Another well-known brand opening this is the 250-room Ritz-Carlton Dove Mountain Resort opening in October in Marana.
“Where we saw the opportunity in Southern Arizona was the luxury segment of the market was underserved,” said General Manager Mike McMahon. “We’ve been looking at Southern Arizona for more than 20 years trying to identify a location for a Ritz Carlton of this caliber.”
Being in Marana, the Ritz-Carlton is not directly affected by Tucson’s increase in the bed tax but McMahon said the whole area is affected.
“It affects every segment of the hotel industry,” he said. “With conventions, sometimes 2 to 3 percent can add up huge and they will go somewhere else. It could end up having the reverse effect. If a jurisdiction is using that to promote the area as a destination that is a good way to increase demand.”
The 106-room Wingate by Wyndham Oro Valley, 11075 N. Oracle Road, is the only other hotel that has already opened in 2009. Other hotels scheduled to open this year are a 101-room Hampton Inn, 251 S. Wilmot Road across from Park Place Mall; the 68-room Country Inn and Suites, 665 N. Freeway Road on the west side of I-10 south of Speedway; and 68 new rooms being added as part of a complete renovation of the Lodge on the Desert, 306 N. Alvernon Way.
The City of Tucson says it’s still hoping to begin construction on a new 525-room downtown Sheraton hotel next year that should be open by June 2012.
“For the next 12 months hotel business will still be down,” says CB Richard Ellis’ Hawkins. “Occupancy will drop below 60 percent in 2009 and RevPAR will decrease more than 10 percent and up to 20 percent in some places. We’ll see increases in occupancy return in latter 2010 and I think we will see more corporate America travel then, but no one wants to appear to excessive right now.”
MTCVB President Jonathan Walker said forecasts are difficult to judges these days because travel worldwide has slowed so significantly.
“We know there will be a rebound and there will be some pent-up demand that will be released when people feel a little more comfortable traveling again,” Walker said.
Contact reporter Joe Pangburn at jpangburn@azbiz.com or (520) 205-4259.
Comments
madcat wrote on Jun 24, 2009 1:00 PM:
The so called downtown convention hotel is doomed how could any adukit want to work with the morons we have in charge of downtown "