“As Greater Phoenix continues to evolve, the visitor industry for our destination continues to grow,” says Eric Kerr, vice president of Insights and Development for the convention and visitor bureau Visit Phoenix. He cites the fact that, since 2020, 46 new hotel properties have opened in the region with more than 7,600 hotel rooms. Additionally, Sky Harbor International Airport has also invested more than $1 billion in renovations and expansions — expanding international routes to Mexico, Canada, Germany and the UK, with multiple airlines launching new and expanded domestic service.
Kerr points out this destination regularly hosts some of the largest annual events in the world, like the WM Phoenix Open, Fiesta Bowl, Barett-Jackson and two NASCAR race weekends. And we’ve recently hosted Super Bowl LVII and will host the 2024 NCAA Men’s Final Four in 2024. “These events, outside the Olympics, are two of the largest rotating events a destination can host,” he says. “These events are global spectacles and bring the entire world to us while generating millions in direct spending to support the destination and support the region’s economic development efforts.”
He sees incredible growth that is not slowing down and notes the Greater Phoenix hotel market has one of the largest hotel pipelines in the country, with more than 110 properties and 14,800 new hotel rooms proposed for the destination. Luxury, high-end hotel developments that are being announced and preparing to open include The Global Ambassador, VAI Resort, Caesars Republic Scottsdale and Ritz-Carlton Paradise Valley. Says Kerr, “The excitement and anticipation for these properties begins in the development stage and are sure to draw high spending travelers to the destination.”
Michael Martin, president and CEO at Tempe Tourism Office, points to some of the activity in Tempe, noting the 5,000-seat Mullett Arena at ASU is home to ASU Hockey and NHL team Arizona Coyotes Hockey, the community IcePlex, and hosts major concerts and other national acts and activities. And newly opened in Tempe is Omni Tempe Hotel at ASU, with 330 rooms, more than 30,000 square feet of meeting space, two restaurant concepts, a coffee shop and a rooftop pool area with bar.
Commenting on new economic drivers, Stephanie Pressler, director of Community and Government Affairs for Experience Scottsdale, says, “In recent years, wellness has been a growing trend in tourism, and Scottsdale’s stirring natural beauty, resort spas and outdoor adventures have attracted leisure visitors.” She sees special events and mega events as having been especially important in driving tourism this year, from the Super Bowl to the first full Cactus League Spring Training season since 2019. “Meetings groups enjoy our unique outdoor venues, as well as our dining and arts and culture.”
Recognizing that travelers, whether leisure or business, are seeking out unique experiences, Experience Scottsdale and the City of Scottsdale partnered with local businesses to develop the Exceptionally Scottsdale Collection, distinctly Scottsdale experiences for locals, visitors and meetings groups alike.
Connecting tourism and the economy, Visit Mesa marketing director Kate Yordi shares, “We’ve seen new types of visitors emerge out of the pandemic, but we are really looking forward to the continual growth of the digital nomad market, or those who are able to now travel more frequently and for longer stays due to their flexible work schedules.”
And Kerr notes the impact of growing economic development sectors, as Greater Phoenix has become a burgeoning tech hub with the investment of TSMC “in addition to landing one the country’s largest technology conference in SemiconWest, which will be hosted at the Phoenix Convention Center in 2025, 2027 and 2029.”
Tourism and Conventions Retain Economic Strength
Pressler notes Scottsdale has been reaping the benefits of a strong tourism industry for well over a century, and, despite economic headwinds, travel sentiment studies indicate Americans intend to prioritize travel in their budgets in the coming months. “From the 19th century to the 21st century,” she says, “tourism has helped spark our community’s economic growth and development and has remained one of Scottsdale’s leading industries — in jobs, tax revenue and economic impact.”
She reports that, though the industry was significantly impacted by the pandemic, once hospitality businesses reopened, U.S. visitors returned; once border restrictions lifted, international visitors began traveling here as well. In 2021, the most recent year data is available, Scottsdale’s 9.7 million visitors generated an economic impact of $2.5 billion and helped put nearly 20,000 people to work in the community. “Tourism has proven to be a resilient industry, and we expect those numbers to grow as the industry continues to recover,” Pressler says.
Describing the travel sector as an integral part of our economy, Kerr notes that visitors generate significant economic benefits to households, businesses and government alike and represent a critical driver of the city’s future. In 2021, more than 16.3 million visitors came to Phoenix and spent more than $3.2 billion in the region, with spending impacting multiple industries directly and indirectly. “This amounts to more than $8.7 million spent in the city from visitors each day — and this was still considered a down year due to effects of the pandemic,” he says.
In 2021, tourism supported jobs accounted for 7.3% of all jobs in the city and tourists generated more than $452 million in state and local taxes. Kerr points out these taxes support state and local government services like police, fire, parks, transportation, education and healthcare for Phoenix-area residents. According to Tourism Economics, each household in Phoenix would need to be taxed an additional $778 to replace the visitor-generated taxes received by state and local governments in 2021.
Asked if we could still rely on tourism and conventions as an economic driver as we have in the past, Yordi responded with an unequivocal “absolutely,” noting, “Post pandemic, leisure travel rebounded fairly quickly in many markets, even surpassing 2019 benchmarks as of last year.” Although the meetings and group visitor segment is still below pre-pandemic levels, she cites analysis by Tourism Economics predicting a full recovery by 2024. “Additionally, when looking at the potential impacts of an economic recession, U.S. travelers show no signs of cancelling their travel plans or travelling less as a result,” she says. She points out, however, they are reducing spend on retail transactions, prioritizing experiences over consumer goods.
Experience Scottsdale’s April newsletter reported that, in the first months of 2023, Arizona experienced a “super season” from the confluence of sports and tourism. Super Bowl LVII, spring training and the WM Phoenix Open, combined, resulted in an economic “blast” for the state. In fact, it cited the Common Sense Institute of Arizona report for February that 6.4% of Arizona’s total economy comes from the sports and tourism sector. Among the businesses that benefited from the ripple effect of those events were restaurants, hotels, casinos and tourist attractions. In fact, Arizona Restaurant Association President Steve Chucri shared anecdotal evidence some restaurants saw sales increase 25% to 35% or more from January to March. Common Sense Institute Executive Director Katie Ratlief was quoted as observing, “We have such a strong sports and tourism sector. When we have major events like the Super Bowl, it gives us an opportunity to sell the state. People come for the sporting event but stay for other tourism opportunities.”
Martin reports that Tempe is experiencing a surge of interest in group meeting requests for proposals. “We are seeing an increase in Requests for Proposals across the board for all types of group meetings,” he says. He’s observed a growing demand to return to meetings, perhaps as a response to the increase in work-from-home across the country, with group meetings seen as a way to unite staff, associations and other groups who otherwise are not seeing each other as much as they did pre-COVID. “The only difference now,” he says, “is that the booking window seems to be much shorter and the group sizes (total attendees and rooms contracted) are not as large as pre-COVID.”
CVB Strategy
Visit Phoenix promotes the destination to a global audience of potential visitors that include meeting planners, travel agents, tour operators, travel media and leisure travelers, according to Kerr, who reports, “We book and support nearly 70 large meetings and conventions in the Phoenix Convention Center annually.”
Its marketing targets key feeder markets like Chicago, Denver and Southern California, aiming to generate new stays in the destination. And it encourages visitors who already selected Phoenix to spend more time in the destination taking in all that Phoenix has to offer.
Pressler makes the point that, before a visitor or meetings group decides on a specific hotel, golf course, spa or restaurant, they first must choose to come to the destination. “They need to be not only aware of Scottsdale, but also see positive portrayals of the destination that create a desire to visit. They need to be frequently reminded of the destination so that Scottsdale is top of mind when they’re planning their travels.” With tourism such a fiercely competitive industry, CVBs invest considerable time, research, testing and development into creating a destination brand that is effective and appealing. “Through our marketing, public relations and sales efforts, Experience Scottsdale ensures that visitor and group dollars land in our community,” she says.
In fact, noting that travel is often the first step in shaping perceptions for potential residents, business owners and C-suite executives, Pressler says, “Experience Scottsdale’s destination promotion contributes to a positive overall impression of the area.” Citing research conducted by Longwoods International, she shares that consumers who recalled Experience Scottsdale’s promotions were not only more likely to visit, but also more likely to view Scottsdale as a good place to live, work, start a business, purchase a vacation home and retire.
“Experience Scottsdale also works closely with the City of Scottsdale’s economic development team to attract group business from the key segments and industries they are targeting, such as financial, insurance and healthcare,” Pressler relates. For example, in February, to leverage the appeal of the Super Bowl and WM Phoenix Open, Experience Scottsdale assisted the economic development team in hosting corporate site selectors in Scottsdale, allowing them to experience all Scottsdale has to offer.
This is a point Yordi also makes, referring to the organization by a combination of the old and new terms: destination marketing organization as well as convention and visitors bureau. This more explicitly recognizes that, at the core of every DMO/CVB is the objective for economic growth. Thus, she notes, many DMO/CVBs are even part of the city’s Economic Development Department. “At Visit Mesa,” Yordi says, “our mission is to ‘Promote the value and vitality of our visitor economy to create a better community.’ We do this by carefully curating content and inspiration for visitors, meeting planners, sports groups, and even residents to visit, stay and spend in our community.”
Visit Mesa also has a Sales Team that goes out on behalf of its local hospitality partners to promote the destination as a premiere location to host their events, whether that is a tradeshow, conference, tournament or group tour. Says Yordi, “By bringing this business to Mesa, our community benefits from the impact of the visitor dollar. Not only do they see the economic value through the additional revenue injected into the local economy, but they also benefit from the state and local taxes generated off of visitor spending.”
“Curating content is the most important factor for us right now,” says Tempe’s Martin. This means new and updated photography, video and stories. “We believe that keeping our content fresh, reliable and relevant will win over our target markets. People are curious to see what is new in the outdoor, dining and cultural landscape. Our markets are also interested in diversity and want to know how Tempe walks the walk when it comes to DEI.”
Martin found this to be a factor before COVID, but feels it now has risen to the top as people are seeking quick and digestible content in their busy lives. “So, while content has always played an important role, it has increased in relevance.”
COVID Impact?
Pressler recalls that, early in the pandemic, people were largely traveling closer to home, and Experience Scottsdale saw visitors coming from states like Nevada and New Mexico, which were not traditional feeder markets for visitation. Experience Scottsdale leaned into digital advertising, which enabled flexibility and cost efficiency in its marketing. This also allowed the organization to raise awareness of Scottsdale in such new markets — reaching potential travelers who had perhaps never considered the destination before. “We continue to leverage this strategy, and, while top markets like New York City and Chicago remain important, we’re also excited to introduce Scottsdale to new visitors around the country,” says Pressler.
In the meetings segment, Experience Scottsdale worked with Arizona-based planners to ensure they were considering Scottsdale’s hotels, resorts and venues for their meetings, conferences, retreats and events.
“For Visit Phoenix, our sales, marketing and media relations teams are back out promoting the destination, attending tradeshows and conducting sales missions to generate new interest in Phoenix,” says Kerr. Efforts have included conducting destination and organization branding exercises with resident and visitor feedback, launching new visitor services that include a LiveChat function on its website, and offering a dedicated Visit Phoenix app that is available on iOS and Android.
Observing that, since COVID, dozens of new hotel properties have begun development and millions of dollars have been spent to renovate and enhance existing properties, Kerr points specifically to the multiple new hotels and attractions that have opened over the last five years that cater to kids and families, naming Great Wolf Lodge, OdySea Aquarium, Medieval Times and Popstroke as among the most popular. Says Kerr, “These are amazing attractions locals can experience with their families while also providing new experiences for visitors with children to experience.”
This focus on the local community is relatively new. As Yordi shares, “A silver lining to an otherwise difficult time was that COVID helped us realize the importance of our local community’s buy-in.” During that period when almost no one was traveling, Visit Mesa shifted almost overnight to adapt its messaging, focusing on residents and creating informational hubs to help local businesses reach a greater audience. “We realized how valuable the support of our residents and hospitality workforce is to the overall success of the destination, therefore we have continued to include residents in our campaigns and our strategic plans,” she says.
Additionally, Visit Mesa has invested in the future of the local workforce, starting the Mesa Regional Foundation for Accessibility, Diversity, and Inclusion in 2022. “We saw many of our closest hospitality partners struggle to keep up with demand, needing help filling open positions due to shifts in the workforce caused by the pandemic,” Yordi explains. The foundation’s pilot program, S.T.E.P., introduces students from Title 1 and vocational high schools to career opportunities within Mesa’s hospitality industry.
Visitor-Generated Revenue
The bed tax is an important revenue source, as Mesa’s Yordi explains: Most DMOs/CVBs are funded through some form of bed tax (or sometimes called Transient Lodging Tax or Occupancy Tax). These are fees levied off hotel room bookings, a percentage of the average daily rate for that hotel room. A portion of the bed tax along with other sales taxes are remitted to the local and state governments. Another portion gets remitted to the DMO/CVB to fund marketing and sales efforts to bring in visitors and their dollars. In 2016, Arizona began collecting occupancy tax on short-term vacation rentals (STVRs). “While we have seen valid concern for the STVR impact on local communities’ access to affordable housing, the STVR market saw extreme year-over-year growth in tax revenue for the past couple years,” she says, noting, “Visitor tax receipts help keep resident taxes lower, and the yield is more efficient as visitor tax receipts support essential public services, yet visitors themselves typically don’t utilize services like schools, libraries and jails.”
Martin relates that, in 2022, Tempe Tourism saw a calendar year increase in bed tax collection of 45% over 2021. He cites two factors playing a role in this growth:
“First, 2021 was still a recovery year from COVID. There was still a rebuilding taking place in 2021 over the down COVID year of 2020. Then, it appears that in 2022, we had a very strong recovery over 2020 and 2021 in terms of demand for the market. Plus, Arizona has been able to recover more quickly than other parts of the country.
“Secondly, we saw a strong growth in our Average Daily Rate. This is important because the growth in demand was such that our hotel partners were able to raise their rates and still have a positive year.”
Pressler makes her point very succinctly: “Valuable visitor-generated tax dollars elevate Scottsdale’s quality of life,” she says. Sales tax is part of that, and all sales taxes paid by Scottsdale visitors are allocated to the city’s General Fund, helping pay for essential public services such as police, fire and transportation. Bed taxes, meanwhile, are reinvested back into the community and the tourism industry. In Scottsdale, 5% of a visitor’s hotel room rate is collected as bed tax. Half of bed-tax collections are allocated to support the General Fund, special events and tourism-related capital projects, as established by voters in 2010. Since 2010, bed-tax dollars have increased significantly, reaching approximately $34 million in 2022. Over the years, the bed tax has helped support and grow special events like Scottsdazzle, the Parada del Sol parade, Barrett-Jackson Collector Car Auction, and more. The monies have been used to fund, renovate and upgrade tourism-related capital projects, including Western Spirit: Scottsdale’s Museum of the West, WestWorld, and Scottsdale Stadium. “These and many other events and amenities made possible by our visitors are part of what makes Scottsdale not only an attractive place to visit but also to live and work,” Pressler says. The remaining half of annual bed-tax collections are allocated to destination promotion to ensure visitors continue filling Scottsdale’s hotels and resorts and generating these impactful dollars.
Giving a broader perspective, Phoenix’s Kerr reports that visitor spending, visitor-supported jobs and business sales generated $927 million in government revenues, and state and local taxes alone tallied $452 million in 2021. This includes $249 million in sales tax revenues, $44 million in hotel bed tax revenues, and $96 million in property tax revenues. Noting that a substantial portion of these taxes are earmarked to support local residents, Kerr says, “City of Phoenix uses portions of its sales tax revenues to support neighborhood protection, public safety expansion, parks and preserves and transportation infrastructure expansion.”
Observes Kerr, “Without the millions of visitors coming to the city annually, local governments cannot provide the same level of service for their residents.”
Spotlight: The Phoenix Convention Center
“Downtown Phoenix continues to evolve with the opening of new restaurants and businesses,” says Jerry Harper, deputy director of Phoenix Convention Center and Venues.
For instance, a new hotel, Home2 Suites, is under construction in Downtown’s Warehouse District. The completed project will feature 149 rooms and will activate a long-vacant historic structure.
And construction is underway on several mixed-use developments in the area. Among these are Central Station and Palmcourt Tower. Central Station’s two high-rise towers will bring new residential offerings, student housing, retail and office suites to the transit center at Central and Van Buren. A total of 365 luxury for-rent units and 693 student housing beds will be added. Developer Medistar will also incorporate current light rail and bus infrastructure into the completed project. Palmcourt Tower began construction in the first quarter of 2022. Located at the corner of 5th and Van Buren streets, it will offer 354 luxury and workforce residential units.
“Phoenix remains a top destination for meetings and conventions, and the Phoenix Convention Center is consistently on the list of top 10 convention centers in the country,” Harper says. As such, it continues to host conventions with thousands of attendees throughout the year. In 2022, the Phoenix Convention Center saw 65 conventions, with 244,048 in attendance and 309,240 total room nights.
Harper notes that hosting major events, like Super Bowl LVII and the upcoming NCAA Men’s and Women’s Final Four Championships, allows Phoenix as a destination and the Phoenix Convention Center to showcase their abilities. “The national and international spotlight of these global events generates even more interest among meeting and event planners to host their conventions, conferences, or meetings at the Convention Center,” he says.
Noting that the Phoenix Convention Center generates more than $300 million in direct visitor spending annually, Harper says, “The economic lift from meetings, conventions and exhibitions not only impacts our home of Downtown Phoenix, but all of Arizona.”
Overall, says Harper, “The Greater Phoenix economy relies on visitor spending to fund essential government services that enrich our community.”