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Downtown Phoenix facing costly glut of hotel rooms

PHOENIX — Phoenix spent $600 million to triple the size of its convention center, and has added more hotel rooms to the downtown, but a convention expert said the city has yet to see a return on its investment.

Phoenix hosted three fewer conventions last year than it did in 2005. In fact, it hosted about the same number of conventions last year as it did in 1995. University of Texas-San Antonio public policy professor Heywood Sanders said quite a few of the rooms at the downtown Sheraton Hotel built to handle conventioneers have stayed empty.

Phoenix financed the building of that hotel. “The city tried for some years to find a developer who would invest in it, and failed,” Sanders said. “So the city chose to go ahead and finance and build the Phoenix downtown Sheraton itself.”

So far it has not been a success. The Sheraton’s occupancy rate was 52.5 percent in the first three quarters of 2013, which is well below expectations. Downtown hotels had a combined occupancy rate of about 60 percent last year.

Sanders said that competition for convention business is fierce. While Phoenix was tripling the size of its center, Las Vegas and Orlando were doubling theirs. San Antonio and other cities have also financed hotels in the hopes of revitalizing downtowns by drawing more conventions, with little success.

Sanders had advice for Phoenix. “Don’t do exactly what everybody else is doing, and think that somehow you’re going to succeed. Build on your own community’s assets,” he said.

Greater Phoenix Convention and Visitors Bureau spokesman Doug MacKenzie pointed to the recession as a cause for the low numbers.

“People do remember that there was a recession just a few years ago,” MacKenzie said, “but we are coming out of that. In fact, among the top 25 metro areas, greater Phoenix’s hotel market recorded the seventh-highest increase in occupancy in 2013, and this trend is continuing in 2014.”

MacKenzie also said that occupancy rates of downtown Phoenix hotels have grown for the past three straight years.

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