Skip to content

Hotel action moves back to Metro markets as pandemic wanes

Smaller hotels and motels in B.C. outlier markets had outperformed occupancy rates of urban flags that rely on corporate and tourism trade, but times are changing
A C43 Rendering from City Application
Peterson Group and Coromandel Properties are planning a new hotel in Vancouver’s Oakridge area as the hospitality industry emerges from the pandemic. | Submitted

This March, Coast Hotels brought two Peace River hotels, the 63-room former Pomeroy Inn in Grimshaw Alberta, and the 72-room Lakeview Inn in Fort St. John, B.C., under its banner, an indication of the interest in smaller properties and secondary markets that maintained the hospitality sector throughout much of the pandemic.

Okanagan, B.C., hotels, for example, were setting record levels for room revenues during the early summer of last year, but forest fires and then heavy flooding cratered the market. Room revenue data from the provincial government showed $22.1 million worth of hotel rooms were booked in Kelowna alone in the month of July, by far the biggest month ever for the local hotel sector.

But room revenues in Kelowna in August fell to $16.6 million, a level roughly typical for the past five years as guests increasingly avoid the region during peak wildfire season.

In the South Okanagan, Penticton and Osoyoos saw a similar trend. In Penticton, July posted $8.1 million in bookings, also a high-water mark for the community, before falling to $6 million in August.

Penticton opened a new hotel in July 2020, the 98-room Fairfield by Marriott, part of building surge that year that saw the addition of a total of 364 hotel rooms in Kelowna at the new Hampton Inn & Suites at the Kelowna Airport, Hyatt Place Kelowna and Microtel Inn & Suites, even as the pandemic was raging.

But, with the easing of COVID-19 restrictions, analysts expect sales and construction of of upscale urban properties to begin ramping up in 2022.

“The national forecast expects full-year occupancy in 2022 to be 60 per cent and the average daily room rate (ADR) to reach $156 resulting in revenue per available room (RevPAR) of $93, up 61 per cent on 2021,” said Laura Baxter, director of hospitality analytics, Canada, for CoStar Group.

The momentum for major hotel transactions began in late 2021, according to Avison Young.

Hotel transaction volume in Canada’s six largest markets was $712 million last year, Avison Young reported.  That was up 124 per cent from 2020 and exceeds the 2019 total – prior to the onset of the COVID-19 pandemic.

“Traditionally, the majority of hotel transactions that do occur are smaller, but they stand out more [in 2021] simply because there were so few larger transactions of $25 million plus,” Avison Young principal Curtis Gallagher told the Real Estate News Exchange.

Carrie Russell, senior manager at hotel industry consultancy HVS International, does not expect Canadian hotel revenues to fully recover to pre-COVID levels for at least two years.

“In 2019 RevPAR was $107, and in 2021 it was $56, so just over 50 per cent of the peak number,” Russell noted in a March 8 email to Western Investor.

“This year we expect a 44 per cent increase in RevPAR to almost $80 with continued recovery until 2024 when it has fully recovered.  Since the health restrictions have started to lift across the country, we are seeing booking activity increase and hoteliers are optimistic about performance in the spring and summer with a return of sporting events, meetings and social gatherings.  Corporate travel is also starting to resume, albeit at a very moderate pace right now,” she added.

Last year, Vancouver posted the strongest performance metrics, with a 48 per cent occupancy, $156.35 average daily rate and $77.65 RevPAR, while Edmonton reported the lowest ADR and RevPAR figures with $103.80 and $37.16, respectively, Avison Young reported.

Gallagher believes all revenue numbers in major Canadian cities will be higher this year than in 2021.

He thinks Calgary and Edmonton might perform surprisingly well owing to increases in oil prices, which were trading in the US$100 per-barrel range in March.

Colliers, in its 2022 Canadian Hotel Investment Report states, “The recovery is underway but will be a journey” The agency notes there is pent-up demand for travel, particularly for leisure, and leisure/business travel.

After near-zero construction of new hotels in Metro Vancouver over the past three years, there are signs of new hotels being built.

On March 4 Peterson Group and Coromandel Properties announced they had bought a 0.73-acre site in Vancouver’s Oakridge area for a joint-venture new hotel as part of a residential complex.

Landa Global Properties announced last June it plans a major hotel as a keystone of a mixed-use development on a 3.5-acre site near Richmond’s Oval Village waterfront.

Meanwhile, developer Marcon and QuadReal Properties have released plans for a 150-room hotel "comparable to a Hilton or Marriott,” as part of a large mixed-use proposal in Coquitlam Town Centre on Pinetree Way and Lougheed Highway.