While hybrid work arrangements have meant a slow recovery for commercial real estate, hotels are benefitting from the fact there’s simply no substitute for in-person travel.
“Strong leisure travel and a rapid rebound in the average daily rate in many cities is producing a strong hotel performance,” says David Ferguson, director of CBRE Hotels, which released its outlook for the sector Sept. 15.
The report states that Western Canada is forecast to grow in step with the national average next year, with revenue per available room (RevPAR) rising 11 per cent to an average of $104 a night.
Saskatoon will lead the way with 16 per cent RevPAR growth in 2023, according to the report, reaching $78 a room. Regina and Winnipeg follow at 15 per cent, with room revenues averaging $70 and $96 a night, respectively. Edmonton is on track for 14 per cent growth to $72 a night while Calgary will lag Western Canada with just 12 per cent growth to $91 a night.
Vancouver, which has traditionally had some of the highest nightly rates in the country, will log the slowest growth of 12% to achieve a nation-leading average revenue of $182 a night.
The increases put the country’s hoteliers on track to meet or exceed revenues seen in 2019, which remains the high-water mark for revenues prior to the pandemic hitting in spring 2020.
“After a strong summer of leisure travel nationwide, and with a big assist from inflation, CBRE is projecting the Canadian hotels market to finish 2022 at 92 per cent of the revenue per available room (RevPAR) achieved in 2019, prior to the pandemic,” the report stated. “Moderate revenue growth will continue into 2023 as hotel operators push for higher room rates, with RevPAR expected to grow 11 per cent to hit a high of $107 next year. This marks a return to 2019 RevPAR levels and an increase of 70 per cent over the industry’s 2021 performance.”
CBRE attributes the rapid recovery in hotel performance to international arrivals, particularly from the U.S. While corporate travel faces a slower recovery, consumer desire to travel after two years stuck behind closed borders is clear.
According to Destination BC, overnight visitor arrivals topped 1.2 million in the first half of the year, with the U.S. accounting for 69.5 per cent of traffic. While arrivals remained 56 per cent below 2019 levels, they marked a 1,526 per cent surge over 2021, underscoring the rapidity of the turnaround.
Moreover, the pace of arrivals is accelerating. In June, the shortfall from 2019 was 52 per cent and the turnaround from last year was 2,203 per cent.
The activity is spurring operators such as SilverBirch Hotels & Resorts to upgrade guest rooms at three of its Delta-flagged properties this fall, including the Delta Hotels by Marriott Ocean Pointe Resort in Victoria and Delta Hotels by Marriott Grand Okanagan Resort in Kelowna.
“We want to make sure we have a modern product for [our Marriott Bonvoy] members. They’re used to that when the travel around,” said Joseph Clohessy, general manager of the Grand Okanagan Resort, who said the renovations will implement the latest Marriott International standards for the Delta brand.
It will also prepare the 262-room hotel to meet rising demand, following on one of the best summers in years thanks to the strong rebound in tourism.
“It’s still one of our best summers because the average rates were up so much,” Clohessy said, noting that STR reporting for the Kelowna market pegged occupancies at 80.5 per cent in July with an average daily rate of $271.13.
Clohessy said the increase in flights landing at Kelowna International Airport, particularly the resumption of direct flights from Montreal, will help boost traffic. Travellers who took advantage of loosened travel restrictions to travel internationally may also return, helping normalize the market.
“I could see us starting to fall back into regular patterns again,” he said.
