Aided by eased restrictions on travel and gatherings, as well as pent-up demand, Canada’s hotel industry is reaching its highest levels in the pandemic era and exceeding 2019 levels in some metrics, Laura Baxter, director of hospitality analytics for Canada at CoStar Group, said.
Data from STR, CoStar’s hospitality analytics firm, shows average daily rate surpassed 2019 levels in March for the first time in the pandemic era, reaching $150. She said the increase in ADR has been key in the recovery of hotels in the industry.
“Driving rate is proving to be a successful strategy,” Baxter said. “ADR started to pass 2019 levels in summer 2021 in the leading segments. And only six months later, [revenue per available room] is returning in several others.”
RevPAR performance by hotels in urban and airport locations still lags far behind 2019 levels, down 23% and 16%, respectively. Despite the gap, Baxter said weekend RevPAR for both returned to pre-pandemic levels in March, and the a rebound in corporate bookings could boost weekday numbers.
Group demand reached its highest mark in March since February 2020 amid lowered restrictions on gatherings. Based on past trends, this demand is expected to continue growing until June, when transient leisure demand takes over, she said.
Occupancy in March reached 53.3% and has continued to rise to over 55% in the first half of April — approximately 90% of the levels reached in March and April of 2019. This is the closest the index has been to pre-pandemic performance.
Development Issues
Current supply-chain issues plaguing the industry in the short term are also expected to affect future outlooks as well. Development costs have risen 15% to 30%, and the lack of materials and labor have caused construction timelines to increase, Baxter said.
“This negatively impacts the time required to ramp up to stabilized performance, making development financing currently hard to come by, only made worse by the cycle of rising interest rates,” she said.
The pipeline is expected to continue to slow, with fewer new projects starting than opening, she said. The number of rooms under construction has decreased about 20% since April 2020.
Industry Outlook
With testing requirements at the border getting lifted and international arrivals expected to increase, Baxter said the outlook on the industry is positive. STR data projects occupancy, ADR and RevPAR will continue to increase throughout the rest of the year.
For more of Baxter's analysis of the latest Canadian hotel performance and transactions data, watch the video above.