Wednesday, August 30, 2006

Demand for hotel rooms in Tempe brings building boom

Demand for hotel rooms in Tempe brings building boom
By Katie Nelson
The Arizona Republic

Business travelers and tourists alike flocked to Tempe last year. As a result, hotel occupancy rates were some of the highest in the Valley.

New hotels are being proposed with just about every new downtown development, and it's prompting analysts to wonder: Can Tempe support the industry's growth?

The answer is yes, according to a study conducted by an Annapolis , Md. , company and paid for by Tempe .

Yet the report also cautions that the number of rooms available in Tempe can expand only so far. The report said three hotel projects that are already rolling take up much of the space between "keeping up with demand" and "market saturation" - even though an additional nine hotels could be on the way.

Experts have continually pointed out that although the city is successful at attracting many out-of-towners through its extensive repertoire of events, it also fails to provide them places to spend the night. The result is lucrative bed tax and tourism dollars oozing into Phoenix and Scottsdale .

Nine new hotels that are proposed or are a possibility around Tempe 's core could stop the bleed-out, according to the study. But even more likely to help are the three hotel projects already lined up, which include Hayden Ferry Lakeside, an expanded Tempe Mission Palms and Rio East.

Next week, Hayden Ferry Lakeside is expected to announce the hotelier that will take up residence in its posh master-planned project on the south bank of Tempe Town Lake , according to project manager Randy Levin.

The Tempe Mission Palms is planning an expansion that would increase the number of rooms by more than 60 percent, according to Chris Kenney, the hotel's director of marketing.

And the Pier 202 project that would go on the Rio East site by the eastern part of Town Lake intends to include an upscale hotel.

"The construction of these three projects will absorb 52 to 80 percent of the additional demand," the report says. "However, these projects will add to the segment of the Tempe hotel market that is currently underbuilt."

There are 47 hotels and motels in Tempe , with 5,371 rooms. The majority of those are smaller hotels and economy motels concentrated around Arizona State University . More than 80 percent of Tempe 's hotel room rates are less than $150 a night, according to the study.

That proves there is ample room for upscale options, some say.

"It (high-rate hotels) means more tax dollars coming into the city," said Michael Martin, executive vice president of the Tempe Convention & Visitors Bureau. "And typically that type of rate will bring visitors with a higher disposable income."

Tempe officials will use the study to guide development as it grows, said Chris Messer, a principal planner for the city. It's the second hotel study the city has done in three years; the other was conducted in 2004.

"It's not an exact science to see what's out there and what's needed," Messer said. "Hotels are one of those difficult things to develop, so it's odd that a lot of the big projects almost always mention hotels. Apparently, (this study shows) there is a market for them, but no one has been able to put one together yet."

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