CHIC2024, PART I: Navigating change and growth

Following are some of the key takeaways from ‘Speed Data’

As we approach the end of an eventful period marked by unprecedented challenges and remarkable recoveries, the Canadian hotel industry stands on the cusp of stabilization and sustained growth.

The past few years have been a roller coaster for the Canadian hotel industry, with dramatic fluctuations in revenue per available room (RevPAR). In 2021, amidst uncertain predictions, RevPAR surprisingly doubled expectations, jumping by 108 per cent with an additional increase of 18 per cent in 2023. This resulted in a RevPAR that was $31 higher than anticipated, reflecting a strong recovery post-COVID-19.

As we moved into 2024, the industry anticipates a shift towards a more stable growth pattern. Experts predict a modest RevPAR growth of 2.3 per cent for the current year, with gradual increases to 2.8 per cent in 2025 and 3 per cent in 2026. This transition marks a return to basics, where operational excellence and customer experience become the focal points for sustainable success.

The construction landscape in Canada has been conservative over the past decade, with an average annual growth of only about 0.5 per cent in new hotel rooms. At the beginning of April, there were 61 hotels under construction, adding nearly 7,400 rooms, which represent 1.7 per cent of the total supply. Notably, the majority of these new properties are concentrated in Ontario and British Columbia, with big names like Marriott, Hyatt, and Hilton dominating the branding landscape.

Several emerging trends will likely shape the future of the hotel industry. One significant development is the changing regulations around short-term rentals, such as the ban on such rentals in primary residences in British Columbia. This could lead to increased demand for traditional hotel accommodations.

Moreover, large-scale events like the upcoming concerts by Taylor Swift and the FIFA World Cup are expected to significantly boost occupancy rates and RevPAR in major markets like Vancouver and Toronto.

Despite the optimistic outlook, the industry faces several challenges, including the high costs of construction and a potential softening in leisure travel demand. Nevertheless, the sector remains a resilient asset class, especially as an inflation hedge, with Average Daily Rate (ADR) growth typically outpacing inflation.

The industry is also beginning to place a greater emphasis on ESG factors, which are increasingly influencing investment and lending decisions. Hotels are being evaluated on their environmental impact and social practices, signalling a shift towards more sustainable and responsible business operations.

As the Canadian hotel industry navigates through these changes, the focus remains on adapting to the new norms and leveraging opportunities for growth. With a balanced approach towards new developments and a steady hand at managing operational efficiencies, the future looks promising for the Canadian hotel industry.