Shifting demand and event volatility reshape Phoenix hotel performance

Article originally posted on CoStar on March 9, 2026

Phoenix’s quarterly segmentation data illustrates a market increasingly defined by demand rotation, event concentration and pricing discipline rather than growth across all major segments.

Short-term travel demand was the primary catalyst behind the strongest quarters of 2024, especially in the winter-driven first and fourth quarters as leisure travel and major events filled more room rooms. This momentum allowed hotels to raise prices, reinforcing the segment’s role as the market’s rate leader.

That pricing advantage persisted into early 2025. During peak winter periods, transient average daily rate remained above $370, maintaining a notable premium over group rates. The pattern underscores a clear dynamic: When higher-rated leisure and compression-driven demand materialize, rate expansion follows.

As transient occupancy approached the high-30% range in early 2025, the revenue impact became more pronounced, with RevPAR for these travelers moving above $140. The segment continues to generate a disproportionate share of revenue during peak demand windows, showing that it plays a bigger role than others in how the overall market performs.

Group demand plays a different role. It stabilizes occupancy, but at lower rates. In the first quarter of 2025, group occupancy approached 36%, nearly matching transient levels, yet ADR remained about $30 lower. The structural trade-off is evident. Group demand fills rooms efficiently, particularly midweek, but at negotiated rates that cap upside.

Year-over-year comparisons also require context. The first quarter of 2024 group performance was weighed down by difficult comps against the first quarter of 2023, which benefited from Super Bowl LVII-driven compression. By the first quarter of 2025, comparisons normalized, making group demand appear healthier as the market returned to a more typical convention calendar.

Midyear trends in both 2024 and 2025 further clarify the correlation between segmentation and rates. During both years, transient ADR declined from $260 in Q2 to $190 in Q3 as seasonal leisure demand cooled. Group ADR similarly softened toward the low $200s in the third quarter, amid lighter convention months. Notably, occupancy declines did not trigger sharp rate discounting, signaling disciplined pricing.

As 2025 progressed, group demand softened amid fewer convention bookings and tighter corporate travel budgets. Transient demand, while not accelerating, remained comparatively steadier. Broader economic uncertainty appears to have weighed on corporate travel appetite, while consumers also became more cautious on discretionary spending.

This year, a wave of new hotel openings is expected to keep results under strain. With room supply growing faster than demand, attracting group bookings will be key to keeping hotels filled, while steady pricing from everyday travelers will be crucial to holding room rates across the metropolitan area.