Article

Hotels Industry Expected to Stabilize and Grow in 2024

December 6, 2023 3 Minute Read

Hotels Outlook Meeting

It’s all hands on deck in Canada’s hospitality sector. For the first time since 2019 the hotel industry is operating at full capacity, without restrictions.

“2023 has been a year of recovery for the hotel sector,” says CBRE Hotels Director Nicole Nguyen. “We’ve seen hotel stays in Canadian cities exceed pre-pandemic levels and reach peak performance amid pent-up demand for travel.”

According to CBRE’s new hotels market outlook, the sector has recovered beyond 2019 levels.

National Revenue Per Available Room (RevPAR) – a key indicator of hotel performance – is on track to reach an average of $128 for 2023, a 17% increase from last year. This growth is led by Canada’s major markets, which account for more than 42% of all hotel rooms across the country.

Strong demand from domestic leisure travelers has contributed to the recovery of hotels in 2023. Business travel also helped as conferences and corporate events have slowly resumed. And bleisure – combining business and leisure travel – has grown in popularity among corporate travelers.

It will come of no surprise to anyone that has travelled that hotel costs have risen. The National Average Daily Rate (ADR) is projected to reach a new high of $193 by year’s end, compared to $179 in 2022. The national occupancy rate is also expected to reach a new peak for the industry, hitting 66% by the end of the year – more than double its pandemic low of 30% in 2020.

And there is little relief in sight. Occupancy levels will likely remain elevated as new hotel supply growth stays modest at 0.9% of the total inventory, lower than the annual average of 1.5% recorded between 1998 and 2019. Hotel construction is facing headwinds from the knock-on effects of pandemic construction site shutdowns, supply-chain issues and elevated construction and financing costs.

“It’s not all good news for hotel operators. The topline has seen strong growth, but so have the costs,” says Nguyen. “It makes it challenging for hotel projects to be financially viable and for existing hotels to grow the bottom line, even with a strong rebound in travel.”

Hotel Horoscope

Almost all of Canada’s major markets expect to see RevPAR continue to grow in 2024, with the exception of Winnipeg and St. John’s, which are projected to see small declines in RevPAR performance.

Nationally, RevPAR is expected to increase 4% year-over-year in 2024.

As international travel continues to recover, Vancouver is forecast to witness increased demand for hotels but it is facing capacity pressures. The city’s RevPAR is on track to surpass $200 by the end of this year – the only Canadian market to do so – and it’s expected to reach $225 in 2024.

Calgary and Edmonton’s hotel sectors are benefitting from Alberta’s economic growth, with Calgary’s RevPAR forecast to exceed $100 by year’s end.

Saskatchewan is expected to see 6% RevPAR growth in 2024, driven by Saskatoon and Regina.

Ontario and Quebec’s major hotel markets are projected to see year-over-year RevPAR increases of 4% in Ontario and 5% in Quebec in 2024. Atlantic Canada will see more muted RevPAR growth, at 2%.

“The hotels industry will continue to face cost pressures and uncertainty next year,” says Nguyen. “But with continued growth on the horizon, the future still looks bright for the sector.”

Recent Insights

Stay In The Know

Subscribe today and join hundreds of professionals who get the latest blogs delivered straight to their inbox.