CBRE Says Canadian Hotel Industry Recovery Will Take Three Years
27 May 2020
Revenue Per Available Room (RevPAR) is forecast to be down 50% in 2020
COVID-19 has impacted the Canadian accommodation industry more suddenly and severely than any other commercial real estate sector. Border closures and shelter-in-place orders caused hotel occupancy to plunge from historic highs to less than 20% virtually overnight.
The number of visitors and the rate they pay per room declined significantly and CBRE Hotels is now forecasting that Revenue Per Available Room (RevPAR) will be down by 50% in 2020. Looking ahead to 2021, RevPAR is expected to be 20% below 2019 levels. Only after 36 months is the hotel sector forecast to return to pre-COVID-19 performance, according to the CBRE Hotels Q1 2020 Update.
“The easing of travel restrictions and social distancing guidelines is the first step to recovery in the hotel sector, but consumer confidence is critical and may take a long time, plus a vaccine, to revive,” said Brian Stanford, Senior Managing Director, CBRE Hotels. “And there could be further downside for the hotel sector to come.”
Here is some of what CBRE Hotels expects for the Canadian hotel sector in the months ahead:
- Recoveries will vary: It’s likely that Full Service hotels and Resorts will experience a more protracted recovery in demand, given the importance of meeting/conference business. Conversely, Limited Service hotels, particularly those that have remained open, may see demand return more quickly.
- Survival phase: The industry is crossing from the Initial Impact and Short-Term Relief Phase into the Survival Phase. Owners and operators must map out a business plan to get past the next 12-18 months, the minimum time required before they can look ahead with some confidence.
- Adapt or else: Recovery will necessitate innovation at hotels to address social distancing protocols, enhanced sanitation measures, and revised operating procedures.
- Challenges getting deals done: Lenders are continually assessing their hotel loan books, focusing on key relationships and hotels with a solid business strategy. Hotels that had weak operations going into this pandemic will be highly scrutinized and without new capital, some will inevitably be forced to recapitalize or sell.
- Stress points: Single asset owners and developers – particularly in Alberta, Southern Saskatchewan, and Northern B.C. – who do not have established lender relationships, deep capital reserves, or the nimbleness to adapt to consumer expectations, will face big challenges.
Read more in the CBRE Hotels Q1 2020 Update.
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