Northern Arizona hospitality feels pinch of Canadian travel decline, wildfires and shift to upscale hotels

Article originally posted on CoStar on September 18, 2025

Recent performance in Northern Arizona’s hospitality market is shaped by a pronounced decline in Canadian inbound travel, the disruptive impact of the North Rim fire and the region’s distinctive hotel inventory mix.

According to the International Air Travel Statistics Program APIS I-92 Data, Canadian arrivals to Phoenix fell by 24% year over year as of July, following a string of monthly contractions that began in April.

Airlines have shifted schedules, and industry contacts describe the United States as a “fly-over” country for Canadian travelers, now opting for destinations like Mexico instead of Arizona and Florida. In August, Mexico’s secretary of tourism reported a 12% increase in Canadian tourists from January through June compared with last year. This contraction of Canadian tourists across the U.S. and Arizona is removing what could have been a much-needed boost to occupancy, especially in gateway markets like Phoenix and for the Northern Arizona areas.

Wildfires posed another challenge to the area. The North Rim fire, specifically the Dragon Bravo Fire, destroyed the Grand Canyon Lodge and forced the closure of the North Rim for the remainder of the 2025 season, softening a major feeder market for the cities of Flagstaff and Page and cutting off peak visitation to the Grand Canyon during the critical late-summer and fall periods.

Flagstaff’s July revenue per available room, or RevPAR, was down 3.7% year over year, based on a trailing 12-month average, driven by lower occupancy growth of 2.1% and an average daily rate drop of 1.7%. Page saw similar effects, with occupancy and RevPAR dampened by the loss of North Rim traffic. Recovery will depend on how quickly the infrastructure can be rebuilt and how effectively marketing campaigns restore traveler confidence in the area.

Despite these setbacks, the leisure travel market shows pockets of sustained demand. Domestic drive-to demand remains the backbone of the Northern Arizona region, as international recovery lags and group demand lessens. The bifurcation in performance is clear: Upper-tier hotels stabilize the northern markets, especially as rates stay elevated and occupancy falls.

The region stands out because of its concentration of upper-tier and independent properties that cater to leisure-driven, drive-to demand. Flagstaff and Sedona, for example, feature a mix of historic lodges, boutique resorts and newly renovated upscale hotels that appeal to travelers seeking immersive experiences tied to nature and culture. This inventory mix has helped stabilize performance even as occupancy softens, with ADR growth offsetting declines in lower-tier segments.

Recently, upper-upscale properties in Northern Arizona have seen a notable surge in demand, bolstered by the debut of several newly renovated hotels and an increasingly distinct preference among travelers to the region for higher-end accommodations. These trends mirror broader shifts across U.S. travel markets.

In contrast, the luxury scale and middle-class segments remained flat, and the economy-class segments experienced declines. Average daily rate growth is helping to offset occupancy declines, with Northern Arizona’s combined submarkets posting a 1% average daily rate increase in July, even as occupancy fell by 1.6%. Transient demand, primarily leisure-driven, has remained steady, though it trended about 1% below July last year, likely reflecting the impact of fewer Canadian tourists.

Wildfire risk and economic uncertainty continue to temper growth, and incremental softer demand across the region adds pressure on occupancy. Through the remainder of 2025, market participants are focused on mitigating declines and positioning for recovery.

The outlook for the first half of 2026 suggests performance will remain steady among upper-tier segments, supported by modest ADR growth and a traveler profile that favors higher-end accommodations. Lower-tier properties may continue to face challenges, particularly if new demand drivers do not emerge. Northern Arizona’s hospitality sector continues to require adaptability as it faces shifting demand patterns and external pressures.