Tempe Hotel Market Surges in 2018

The hotel market in Tempe is surging. Last year, hotel room rentals were up by 250,000 rooms over 2017, according to research from the Tempe Tourism Office. Hotel sales totaled $175 million, a 12% year-over-year increase and a $36 million increase over 2016. Demand for hotel space in Tempe has been steadily increasing in pace with office and population growth. In 2018, new hotel supply helped the market to achieve these significant gains.

“We have had a lot of demand for a long time, but our supply has not been enough to meet that demand,” Maria Laughner, economic development specialist at the Tempe Tourism Office, tells GlobeSt.com. “In 2018, we finally had enough new hotel supply to meet the demand. We had 600 new hotel rooms come online last year, and another 500 are in the pipeline to come online this year. That is just in the Downtown area.”

Several new hotel projects are coming to the market, including high-end brands Westin, Canopy by Hilton and Omni. There has also been growth of extended stay brands in South Tempe. Those projects include the Watermarke, The Grand at Papago Park, which will include 350,000 square feet of hotel space, and a hotel planned for phase two of the I.D.E.A Campus. “Those projects are really indicative of the market in Tempe overall, especially when you talk about commercial space,” says Laughner. “We do command a premium in Arizona because we have the highest and best space in the valley right now. Companies are investing and building on spec because they believe that there is a lot of growth to be had in this market. Hoteliers are coming in with the same prospective.”

These projects are part of a robust construction pipeline that includes speculative office and multifamily developments. The growth of those asset classes has in turn fueled more hotel growth. Tempe Town Lake has been particularly beneficial to the growth of the market. “Our Tempe Town Lake has driven growth of industry in Tempe. Since the creation of the lake, we have had more than 30,000 new jobs created in that area,” explains Laughner. “That is important to note, because when you have so many companies with high-level companies, you get more business travel. These hotels are also bringing in conference space, and that lends itself to more events.”

While the office market has driven job growth in Tempe, the hotel market is fueling economic growth as well, by increasing foot traffic and patronage at local establishments. “We see local economy impact from the increased foot traffic. Restaurants are fuller, and we have seen increased shopping. Those numbers have gone up,” adds Laughner. Last year, Tempe welcomed 3.7 million tourists with total visitor spending at $730.5 million.

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