New hotel supply, sales to reach 10-year high this year

Investment volume is expected to eclipse 10-year national average of $1.8 billion, while new supply forecasted to increase 2 per cent

Western Investor
May 15, 2019

getty hotel
- Getty Images.

National hotel construction and sales volume is expected to exceed historical averages this year, according to a new forecast report. 

New supply is expected to increase by 2 per cent in 2019, the highest single year of growth since the financial crisis of 2008. The increase in hotel starts has been buoyed by strong sales and attractive development land prices in suburban markets, CBRE reports. Investment volume is predicted to surpass last year’s $1.5-billion mark and likely eclipse the 10-year average of $1.8 billion.  

“Canadian hotel operating performance and investment metrics have never been stronger, and all indications point to investment volume matching if not exceeding historical averages in 2019,” said Bill Stone, executive vice president of CBRE Hotels. “New supply is a good challenge to have as it reflects the strength of the market and Canada’s ability to compete on the world stage.”

Hotel occupancy reached a record-high of 66 per cent nationally in 2018. Still, certain areas in Alberta are facing occupancy challenges as markets struggle to keep up with new supply. While the resort market in the province is thriving and Edmonton and Calgary show modest signs of growth, oil patch towns continue to lag far behind the national growth average. Despite diverging trends across the province, Alberta overall hotel market is expected to see demand growth of 1 per cent in 2019. 

Revenue per available room (RevPAR) is expected to increase along with demand, particularly in smaller suburban cities where cost of available development land versus revenue is more balanced. Seventy-two percent of hotel transactions took place in secondary and tertiary markets in 2018, compared with just 59 per cent a year prior.

B.C. led RevPAR growth last year, increasing 10 per cent year-over-year. RevPAR is expected to grow in all Western Canadian provinces and 4.7 per cent across Central Canada. 

“Our hotels are full, and we are in good shape to continue to grow top and bottom lines in 2019,” said David Larone, senior managing director of CBRE Hotels. 

Tanya is Western Investor's web content and social media coordinator. She first joined the Western Investor team as a editorial assistant in 2016, after a summer spent freelancing at Glacier Media papers The Burnaby Now and New West Record. She is a graduate of Langara College's journalism program.
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