This Industry Outlook is a portion of the 2019-2020 Arizona CFO Spotlight Survey Report

2019-2020 Arizona CFO Spotlight Survey logo
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Levels of Optimism: Moderate

The forecast for this industry is mixed due to rising costs in several areas, but an optimistic consumer base is still spending discretionary money on dining and travel. Local hospitality leaders anticipate a 5-10 percent growth rate, which is a little more optimistic compared to U.S. expectations for revenue decreases in 2018. One reason may be that tourism in Arizona is stronger due to the desirable climate and increased promotion in the media as a vacation destination. Tucson is currently ranked on Fodor’s travel list of the “Top 52 Places That Inspire Us to Get Going” for its wide-open spaces and Native American and Spanish influences.

Hotel and restaurant remodeling and upgrades have been in full swing since 2017.

However, costs are rising for supplies, advertising and personnel, with some leaders reporting a 5 percent average impact on wage costs to keep key employees. They say that employees may jump to another hospitality competitor or leave the industry entirely for better-perceived opportunities. Costs will rise again in 2020 with another mandated $1 per hour increase in the minimum wage.
To increase efficiency with fewer or short-handed staff, hospitality leaders are investing in advanced point of sale (POS) and scheduling systems.

On the upside, new large employers are supporting a more diverse customer base in Phoenix and Tucson for hotels, dining and entertainment venues. A positive disruptor is the trend in delivery service apps, which have expanded brand awareness for area restaurants and businesses. Restaurateurs are meeting demand for personalized menu preferences by introducing more kosher, gluten-free and vegan options.

“Our major investments are in remodeling. We are remodeling 10 franchises and building one new one.”

Restaurant Franchisor CFO, Phoenix, 2019

Renovation and remodeling activities have increased as owners upgrade physical locations while cash is available. The Phoenix Business Journal reported that investments in hotel renovation for several properties in the Valley had already begun in 2017, properties that had not been updated since before the recession.

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