June LMS Dives into Hospitality Sector

Credit: BEX

By Tasha Anderson for AZBEX

Hospitality was one sector that was hit the hardest during last year’s shutdown; however, hotel occupancy rates and demand for more hospitality projects are headed back to normal as restrictions loosen and people become more comfortable travelling.

That was the consensus given by the panelists at the BEX virtual Leading Market Series event held on Wednesday, June 2nd, 2021. Attendees logged into hear the current state and future of the Hospitality sector, as well as current projects.

Panelists included Mike Krentz, President of DAVIS; Cari Meyer, Planning Manager for City of Sedona; Robert Schmidt, President of Development for PEG Companies; and moderator Chris Creasey, Director for Tutor Perini Building Corp.

Schmidt discussed that while the business-type downtown airport hotels haven’t been doing well due to less business travel, the more leisure-type hotels are bouncing back fairly quick. He noted that the extended stay hotels are doing better than other hotel types in the market and that occupancy rates for leisure hotels are at around 85 percent. He sees hotels making a full recovery but said that the business hotels will take at least a couple more years.

Krentz and Creasey both agreed with Schmidt’s points and mentioned that as more people are starting to leave their houses, there is a pent-up demand for new hospitality projects. Creasey noted that Indian gaming hotels are “jam-packed” in terms of occupancy and sees a “big boom coming” in new hospitality construction.

Some of the major concerns the panelists had that could slow down recovery in Arizona, included the rising materials costs and labor shortage. Schmidt also discussed other concerns like competing with online platforms for business meetings and where interest rates are heading. Krentz talked about finding creative ways to “package” the hotel to compete with AirBnB.

Hotels in Sedona

Meyer discussed that while there is interest in building hotels in Sedona, it is a more difficult process.

She noted that the city removed lodging as a use and that Sedona doesn’t quite have enough land to build on. “There’s no large parcels available,” she said.

The community in Sedona also sees hotels as bringing in more people and more traffic issues, and Meyer talked about future hotel projects needing to be part of a mixed-use development, in order to address those current housing and traffic issues.

Current Hospitality Projects

During the presentation, the panelists dove into some hotel projects currently in their pipelines.

Meyer touched on Archer Sedona, a proposed mixed-use development consisting of a 188-room resort and 22 units of workforce housing. The project is anticipated to go to Planning and Zoning in a couple of weeks and will go before City Council in July.

Schmidt gave an overview of a few projects, including:

  • The Kimsey: A 190-unit multifamily complex and 168-key hotel with a restaurant in Scottsdale. PEG received zoning approval about eight weeks ago and expect to break ground in a year. They anticipate an early 2024 opening for the hotel portion.
  • The Luhrs Building – PEG bought the historic Downtown Phoenix building and is planning an adaptive reuse to convert it to a Moxy by Marriott. Schmidt noted they are in for permits and the project received financing.
  • Springhill Suites at Papago Plaza – A new five-story, 116-key hotel as part of the Papago Plaza in Scottsdale.
  • Autograph Collection Hotel – Located in Tempe, the 12-story, 184-key hotel is currently on hold as PEG observes how the luxury hospitality market recovers.

In the end the panelists seemed optimistic about the future of the Hospitality market, while acknowledging the headwinds that they will have to pass to get the market back to normal.

The next BEX Leading Market Series event on July 14th will discuss the Office and Retail markets and will be an in-person event! An online ticket will also be available for those that would like to watch from their home or office. For more information or to register, visit: https://bex-events.com/lms/july-2021/.

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