Phoenix hotel market likely to remain under pressure all year

Article originally posted on CoStar on March 5, 2026

Phoenix’s pronounced swings in revenue per available revenue, or RevPAR, over the past two years reflect a market shifting from event-driven distortions into a supply-driven recalibration phase.

Volatility in 2024 was largely driven by comparisons to the prior year. The 8.1% RevPAR decline in the first quarter reflected extraordinarily difficult comps against early 2023, when Super Bowl LVII, the WM Phoenix Open and Cactus League Spring Training generated outsized compression and elevated rates. Without the Super Bowl in 2024, rates reset to more typical levels.

By the second quarter of 2024, RevPAR had recovered, climbing 6.7%, as group travel picked up, convention activity was strong and last year’s numbers were easier to beat. For much of the rest of the year, results were still shaped largely by those year‑over‑year comparisons.

A more structural slowdown emerged in 2025. Following a relatively flat RevPAR performance in the first quarter, despite favorable year-over-year comparisons, momentum deteriorated. In the second quarter, RevPAR declined 8.4%, driven by a 4.7% drop in demand and an occupancy contraction of more than 6%.

Unlike the volatility experienced in 2024, this weakness was neither event-driven nor the result of difficult comparisons. Instead, macroeconomic headwinds weighed on performance. Trade tensions and tariffs introduced heightened uncertainty, prompting many large corporations to scale back travel budgets. At the same time, declining consumer confidence and persistent inflationary pressures tempered leisure spending.

Importantly, average daily rate compression remained relatively limited compared with the sharper decline in occupancy. This shows that operators focused on keeping prices strong and selling rooms that made money, instead of filling rooms at lower prices.

Results in 2025 already highlighted growing divergence across the metropolitan region. Tempe was one of the few areas to post RevPAR growth, while Scottsdale South and Phoenix Central remained relatively flat. In contrast, Chandler-Gilbert, Mesa, Phoenix West and North-Black Canyon experienced sharper RevPAR declines, largely because fewer rooms were filled, not because prices fell sharply.

This widening differences in performance provide a preview of how each area is positioned to navigate the upcoming supply wave. Luxury-oriented corridors such as Scottsdale North and Scottsdale South are expected to maintain stronger room rates, despite a modest decline in occupancy as new supply is added.

Phoenix Central should remain comparatively stable, supported by its diversified urban demand base and strong upper-upscale positioning. In contrast, segments of the region facing heavier near-term inventory additions, particularly Phoenix West and Chandler-Gilbert, are likely to experience more pronounced occupancy compression as new supply ramps up. Mesa and North‑Black Canyon, which cater more to value‑focused travelers, are expected to deliver steadier but lower results, backed by job‑related and corporate demand.

Looking ahead, 2026 marks a shift into a period shaped more by new supply than by demand growth. Hotel inventory is projected to expand by approximately 6% in 2026, outpacing anticipated demand gains and signaling an absorption phase. While near-term performance will likely remain under pressure as new supply ramps up, the pace of decline is expected to moderate throughout the year, setting the stage for RevPAR growth in 2027 and beyond.

Phoenix’s near-term demand outlook remains supported by a strong pipeline of high-profile events. The 2026 NCAA Women’s Final Four in April and the 2027 NBA All-Star Game in February are expected to generate notable compression and national visibility, reinforcing the metropolitan’s position as a premier sports and entertainment destination. Beyond these marquee events, the city’s robust calendar of major sporting tournaments, conventions and large-scale gatherings, combined with the debut of new luxury hotels, continues to underpin visitation and continues to attract corporate and leisure travelers.