What's next for Canadian hotels?
In welcome news for commercial mortgage brokers, Canada's hotel industry is experiencing its best performance in months.
The sector recorded its highest performance levels in eight months, with data from CoStar Group showing positive growth.
CoStar’s report revealed that hotel occupancy rate rose to 69%, up 0.2% from the previous year. The average daily rate (ADR) rose by 4.5% to $206.39, while revenue per available room (RevPAR) saw a 4.8% increase to $142.32.
“Improvement in Canada’s hotel room rates drove a RevPAR lift in May,” said Laura Baxter, director of hospitality analytics for CoStar. “The occupancy lift, however, was marginal, with the metric contracting across the lower-tier hotels, while Upscale through Luxury showed growth. ADR increases across all classes kept RevPAR comparisons in positive territory.
Baxter noted a shift in demand patterns, stating, “While group occupancy fell 5.5%, transient grew 2.4%. The growth in the transient segment did not, however, translate to higher rate growth.”
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She cautioned that the lower gain in transient room rates is a trend worth watching, as some markets are experiencing rate declines due to softening transient demand.
Among the provinces, British Columbia led with the highest occupancy rate, at 74.3%, up 3.3% from 2023. Vancouver topped the major markets with 83.8% occupancy, a 1.2% increase year over year.
Meanwhile, Prince Edward Island reported the lowest provincial occupancy at 54.5%, down 9.5% from the previous year. Calgary saw the lowest market-level occupancy, declining 1.9% to 67.0%.
“Hoteliers are relatively optimistic as we approach the summer high season,” Baxter said. “Recent consumer sentiment reports about domestic leisure travel and slightly lower interest rates have contributed to the optimism, particularly in destinations driven by leisure demand.
“However, many hoteliers are also reporting shorter booking windows compared to previous years, causing limited visibility into the strength of demand.”
STR's 2024 forecast projected slower rate growth at 1.9%, with an expected deceleration in the last three quarters compared to the first.
The forecast also includes a downgrade to occupancy, now expected to decrease by 0.5% year-over-year due to weaker economic conditions impacting demand more than anticipated.
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