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Record hotel performance to drive new construction

Tuesday, May 14, 2019

According to CBRE Canadian Hotels 2019 Outlook report, new supply of hotel product will increase by two per cent in 2019, marking the highest single year of supply growth in the Canadian hotel market since the financial crisis of 2008.

“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, CBRE Hotels in the firm’s press release.

Stone explained that the only factors that cause significant shifts in the hotel market are either geopolitical events — such as 9/11 and the global financial crisis — or the delivery of new hotel supply.

Driven by owners who are flush with capital pursuing new-build development opportunities in the suburbs of Canada’s largest cities, where land acquisition and development costs remain reasonable new supply will shift to smaller cities in 2019. CBRE further predicts that hotel investment volume will exceed last year’s total of $1.5 billion, and surpass the 10-year average of $1.8 billion.

Other report highlights include:

  • RevPAR, the hotel industry’s key metric of revenue per available room, is projected to grow four per cent this year.
  • Mixed-use commercial projects with a hotel component should continue to draw attention from a variety of investors beyond traditional hotel owners and developers. Notable new projects include Four Seasons Hotel Montreal (which opened May 2019) and Riu Plaza Hotel Toronto (slated to open in 2021).
  • Central Canada will lead the Canadian hotel market in 2019. The region accounted for over 60 per cent of total hotel transaction volume in 2018 — with Ontario representing 69 per cent of the deals in the region ($641 million) and Quebec following at 31 per cent ($293 million).

“The hotel industry in Canada is performing at all-time highs, with record occupancy, average daily rates, and RevPAR, as well as bottom-line performance,” added David Larone, senior managing director, CBRE Hotels in the press release. “Our hotels are full, and we are in good shape to continue to grow top and bottom lines in 2019.”

Visit https://researchgateway.cbre.com/Layouts/GKCSearch/DownLoadPublicUrl.ashx to download the report.

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