Arizona hotels expected to lose $300m in 2022; here's the reason behind the massive loss
PHOENIX - While state figures show a rebound in various indicators for tourism in Arizona, hotels in the state are still expected to lose $300 million in 2022.
Here's what you need to know about the challenges hotels in Arizona are facing.
How are things looking like for Arizona's tourism industry?
Data from the Arizona Office of Tourism show a rebound of sorts for Arizona's tourism industry, at least in certain areas.
Data from March show over 10 million passengers flew to or from Phoenix Sky Harbor Airport so far in 2022, representing a 61.1% change from the same time period in 2021. The same data show over 800,000 passengers flying to or from Tucson's airport so far in 2022, a 93.2% increase from the same time period in 2021.
However, data from the first quarter of 2022 show an occupancy rate of 69.7% for Arizona lodging.
What challenges are the lodging industry facing?
In short, business travel simply has not rebounded, and that is impacting the entire industry.
In particular, individual business travellers, or the person that flies to Arizona for meetings or events and stay for a few days, is lagging far behind. These travellers make up a sizable chuck of hotel revenue.
According to the American Hotel and Lodging Association, business travel revenue will be down nearly $250 million in 2022.
In its 2022 State of the Hotel Industry report, officials with AHLA say hotel occupancy fell to 44% in 2020, and they are expected to reach an average of 63.4% for 2022.
"While some full-service hotels begin operationally breaking even at 50% occupancy, this does not account for mortgage debt and other costs," read a portion of the report. "So even with a
return to near pre-pandemic occupancies in 2022, hotels have a way to go before true recovery."
How are Arizona hotels faring?
"This year's been quite a roller coaster," said Jon Erickson with Sheraton Hotels.
Sheraton Phoenix Downtown is said to be the largest hotel in Arizona. The hotel hasn't had the best time over the last two years. Erickson said the hotel is, just like every other in the Phoenix area, saw business travel, especially travel involving individual business travellers, ground to a halt.
"A much slower build this year, so while it was almost non-existent travel for them at the beginning of the year, we’re starting to see these numbers come back slowly to the hotels. Not anywhere close to 2019 levels," said Erickson.
"Not completely surprised," said Eric Kerr with Visit Phoenix. "We knew here during the Pandemic that it would not recover right away."
Kerr did point out some positives. He said while Arizona's drop from 2019 revenue is 17%, it is actually better than the national average of 23%.
Business travel makes up 15% of hotel revenue.
"It’s not our biggest piece of the pie, but without that here, our market can not fully recover," said Kerr.
How's the future looking like?
Full recovery of business travel is not expected until 2024, according to the report by AHLA.
Kerr believes Arizona can recover sooner than that.
"We have a good strong convention base. We have a Super Bowl and a Final Four in the next couple years that will help us recover quicker than some of our competing cities," said Kerr.
Meanwhile, officials with Sheraton say group travel is nearing 2019 levels, and they actually have some sold-out days ahead.