Market of the Month - Phoenix, Arizona
By Heidi Nielsen, Vice President of Business Development
Phoenix, Arizona, continues to emerge as one of the nation's top-performing Sun Belt markets, bolstered by robust population growth, a diverse economic base, and steady infrastructure investment. As the fifth-largest city in the United States and the fastest-growing large city in the country over the past decade, Phoenix offers an appealing blend of affordability, year-round tourism, and corporate expansion. Long recognized as a hub for advanced manufacturing and logistics, Phoenix is increasingly attracting significant investments in major technology, semiconductor, and healthcare sectors. Notable Fortune 500 companies with substantial operations in the area include Banner Health, Avnet, and Freeport-McMoRan, along with recent expansions from Intel and Taiwan Semiconductor Manufacturing Company (TSMC), whose $65 billion chip fabrication project is reshaping the region's economic landscape; in March 2025, the company announced its intention to expand its investment in advanced semiconductor manufacturing in the United States by an additional $100 billion.
Arizona State University (ASU), located in nearby Tempe,
plays a pivotal role in driving research, workforce development, and innovation
throughout Greater Phoenix. The university's continued expansion—including the
Novus Innovation Corridor, a $2 billion mixed-use research and development hub
adjacent to the campus—underscores the area's rising stature in biosciences and
tech innovation. In the healthcare sector, Banner Health's ongoing investments
include a new $400 million hospital in Scottsdale. Furthermore, in 2025, Mayo
Clinic also recently announced a nearly $1.9 billion investment of its Phoenix
campus, further cementing the area's role as a regional healthcare leader.
Phoenix's airport and convention infrastructure are also
expanding to accommodate long-term growth. In April 2025, Phoenix Sky Harbor
International Airport commenced construction on the $326 million North 2
Concourse in Terminal 3, which will feature the addition of six new passenger
gates. Meanwhile, the Phoenix Convention Center, ranked among the top 20
convention centers in North America, continues to attract high-profile national
events with the help of nearby hotel developments and the city's walkable downtown,
highlighted by a thriving culinary and arts scene. The convention center hosts
an average of 215 events a year, with more than 500,000 coming through the
facility annually.
Known as the Valley of the Sun, Phoenix offers over 185 golf
courses, luxury resorts and outdoor activities, drawing year-round visitors. The
city is also home to four professional sports teams - the Arizona Cardinals
(NFL), Phoenix Suns (NBA), Arizona Coyotes (NHL), and Arizona Diamondbacks
(MLB) - and has hosted major sporting events, including the 2023 Super Bowl and
the 2024 NCAA Men's Basketball Final Four. In 2026, Phoenix will host the NCAA
Women's Final Four and the Xfinity U.S. Gymnastics Championships, as well as
the 2027 NBA All-Star Game.
Year-to-Date Trends:
According to CoStar, Phoenix's hospitality market is showing
signs of softening through mid-2025. As for the trailing twelve months ending
in August, RevPAR in the metro declined slightly by 2.3%, primarily due to a 3.0%
drop in occupancy, while ADR noted a modest increase. The market continues to
benefit from its robust event calendar, which includes the WM Phoenix Open and
the Cactus League Spring. In addition, STARLUX Airlines announced in May 2025
the launch of the first nonstop flights between Phoenix and Asia, an
encouraging sign tied to TSMC's ongoing expansion and rising international
demand. While these developments are promising, the region's reliance on
international travel, particularly from Canada and Asia, may introduce some
near-term uncertainty, depending on the evolution of geopolitical and economic
conditions.
New Supply:
Over the past twelve months, Phoenix has added over 1,000
rooms, primarily select-service and upper-midscale branded properties. Hotel
construction in Phoenix is at a 10-year high, with approximately 4,800 rooms
across 33 properties currently under construction, with 6.7% of its existing
hotel supply in development. The most notable project is the VAI Resort
development in Glendale; with 1,100 keys, the VAI Resort is the second-largest
hotel project under construction in the United States. The 60-acre resort and
entertainment complex was expected to open in late 2025; however, no opening
date has been noted. Another notable addition is the Ritz-Carlton Paradise
Valley, The Palmeraie, which is located within the $2 billion, 122-acre Palmeraie
development; in addition to the 225-key hotel, the project will include
detached casitas, multiple dining venues, a spa, 80 residential villas, and 32
single-family homes, all of which will be Ritz-Carlton branded and managed.
These additions cater to a mix of upscale leisure travelers and business
groups, further elevating Phoenix's hospitality profile.
Transactions:
Over the 12 months through August, Phoenix has been one of
the most active U.S. hotel investment markets, with a volume of approximately
$1.1 billion. Recent transactions have ranged from $91,000 per room at the
Hilton Phoenix Resort at the Peak to $1,275,000 per room for the Four Seasons
Scottsdale. Additionally, the JW Marriott Phoenix Desert Ridge recently sold
for $865 million. Going forward, the market is poised for further transactional
activity, with institutional investors, private equity firms, and regional
developers all showing interest in different asset types.
Despite challenges tied to rising supply and seasonality,
Phoenix's long-term outlook remains highly compelling. Significant investments
in semiconductors, healthcare, and innovation corridors are transforming the
metro into a high-tech powerhouse, while its growing population continues to
support demand across all hotel segments. Infrastructure improvements from
airports to freeway expansions are positioning the city for sustained success
as a regional hub for business, meetings, and leisure. For investors seeking
stable growth and long-term upside, Phoenix represents one of the most
resilient and promising hospitality markets in the country.
