Strong tourism numbers are accelerating hotel recovery as pandemic fears ease

While hybrid work arrangements mean a slow recovery in commercial real estate, hotels are benefiting from the fact that there is simply no substitute for personal travel.

“Strong leisure travel and a rapid recovery in average daily rates in many cities are driving a strong performance for hotels,” said David Ferguson, director of CBRE Hotels, which released its outlook for the sector on 15 September.

The report states that Western Canada is expected to grow in line with the national average next year, with revenue per available room (RevPAR) rising 11 per cent to an average of $104 per night.

According to the report, Saskatoon will lead the way with 16 percent RevPAR growth in 2023, reaching $78 per room. Regina and Winnipeg followed with 15 percent, with room revenue averaging $70 and $96 per night, respectively. Edmonton is on track for a 14 percent increase to $72 a night, while Calgary will lag Western Canada with just a 12 percent increase to $91 a night.

Vancouver, which traditionally has some of the highest nightly rates in the country, will register the slowest growth at 12% to achieve a nationally-leading average income of $182 per night.

The increases put the country’s hoteliers on track to meet or exceed revenue seen in 2019, which remains the highest revenue line before the pandemic hit in spring 2020.

“Following a strong summer of leisure travel across the country and with a big boost from inflation, CBRE forecasts the Canadian hotel market will end 2022 at 92 percent of the revenue per available room (RevPAR) achieved in 2019, before the pandemic,” the report says. “Moderate revenue growth will continue in 2023 as hotel operators push for higher room rates, with RevPAR expected to grow 11 percent to peak at $107 next year. This marks a return to 2019 RevPAR levels and a 70 percent increase over industry performance in 2021.”

CBRE attributes the rapid recovery in hotel performance to international arrivals, particularly from the US. While corporate travel faces a slower recovery, consumer desire to travel two years from now behind closed borders is clear.

According to Destination BC, overnight visitors topped 1.2 million in the first half of the year, with the U.S. accounting for 69.5 percent of traffic. While arrivals remained 56 percent below 2019 levels, they saw a 1,526 percent jump from 2021, underscoring the speed of the turnaround.

In addition, the pace of arrivals is accelerating. In June, the shortfall from 2019 was 52 percent, and the turnover from last year was 2,203 percent.

The activity spurred operators such as SilverBirch Hotels & Resorts to renovate guest rooms at three of its Delta-flagged properties this fall, including 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 it when they travel around,” said Joseph Clohessy, general manager of the Grand Okanagan Resort, who said the renovations will introduce the latest Marriott International standards for the Delta brand.

It will also prepare the 262-room hotel to meet rising demand after one of the best summers in years thanks to a strong recovery in tourism.

“This is still one of our best summers because the average rates have gone up so much,” Clohessy said, noting that STR reports for the Kelowna market put occupancy at 80.5 percent in July with an average daily rate of $271.13.

Clohessy said an increase in flights landing at Kelowna International Airport, particularly the resumption of direct flights from Montreal, will help boost traffic. Travelers who took advantage of relaxed travel restrictions to travel abroad may also return, helping to normalize the market.

“I could see us starting to go back to the usual patterns again,” he said.

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