Canadian Hotel Market Report

Guestroom, OPUS Vancouver.

Guestroom, OPUS Vancouver.

By Don Douloff

Always challenging, the hotel industry in Canada continues to be confronted by a wide range of market conditions and political forces that are shaping and reshaping the business. Below is a province-by-province summary of how each market is faring.

BRITISH COLUMBIA

“Anecdotally, there seems to be a bump in inbound Mexican tourism,” said James Chase, CEO, B.C. Hotel Association. Also growing is tourism from China, Japan, Vietnam and Thailand due to the province’s proximity to those markets; inbound business from Germany and Great Britain is also strong. Australia is a “big market,” particularly in winter, because of B.C.’s ski offerings, he said.

Chase expects 2017 to be better than 2016, in terms of RevPAR and occupancy, driven by Canada 150 sesquicentennial celebrations, which should have a “positive” effect on summer booking patterns.

Driving inbound groups is improved airlift to China, the U.S. and Paris, noted Chase. Plus, international meetings are choosing Canada over the United States because some delegates are having trouble entering the U.S. due to the Trump administration’s tightened travel measures. 

In terms of new construction, there’s “very little supply coming onboard.” In 2016, there were, net, 290 new hotel rooms in the province, said Chase, who added that this year, a 400-room Marriott will open in Vancouver, but the city’s Empire Landmark hotel will close. He noted that the resultant tight supply “is good for operators” with regards to occupancy and growing revenue.

“It’s been a great start to the year. I think the momentum will continue throughout the year.”

ALBERTA

For the hotel sector, “2016 was a very tough year,” says Dave Kaiser, president and CEO of the Alberta Hotel & Lodging Association. Province-wide occupancy was 52.3%, ADR fell 6.6% and RevPAR declined 16%, with some rural markets experiencing occupancy rates of 41 per cent. Figures for early 2017 weren’t much better. Such low occupancy figures “put a lot of operators at negative cash flow.” 

Major cities are “doing a bit better than rural areas because they have other drivers besides oil and gas.” In contrast, “resorts have never done better” due to tight supply and increased U.S. and international tourism spurred by a low Canadian dollar.

On the bright side, a slight increase in oil prices has spurred some drilling, boosting hotel business in a few rural areas.

Not helping matters is the provincial carbon levy, introduced Jan. 1 (which is increasing natural gas bills), and an increase to the minimum wage, which is “putting pressure on labour costs.”

Forecasts call for 2017 demand to grow by 2%, but “the challenge will be absorbing more inventory” — about 1,500 rooms, expected to open mostly in Calgary and Edmonton.

Following the devastating 2016 wildfires, Fort McMurray was, net, down three hotels, and “anecdotally, there’s not much reconstruction.”

SASKATCHEWAN

New builds have brought 1,400 new rooms to Regina and Saskatoon during the last 3 years. This new supply, coming into the market where demand has dropped for the two straight previous years, negatively affected ADR, occupancy and overall RevPAR, said Jim Bence, president and CEO of the Saskatchewan Hotel & Hospitality Association.   

In 2017/18, Saskatoon will see three to four new properties come onstream, for a projected 400-room increase to citywide inventory, which will have an immediate affect on the city’s market share. Regina has no new proposed projects on the books.

The Conference Board of Canada’s preliminary forecast shows that overall tourism visits to Saskatchewan are predicted to grow 3.7% in 2017 and a further 3.3% in 2018 after two years of stability. Tourism in Saskatchewan grew strongly from 2008 through 2014 before stabilizing at 12.5 million visits and $2.15 billion in traveller expenditures in each of 2015 and 2016. 

Visits by Canadians (including Saskatchewan residents) are forecast to grow 3.5% in 2017 and 3.2% in 2018, while those from the U.S. will grow 5.5% and 3.3%, and those from other countries will grow 7.8% and 6.2%, respectively.

Driving this growth is the value of the Canadian dollar, improved economic conditions in the U.S., Canada’s 150th birthday celebrations and increased event-hosting capacity in Saskatchewan.

MANITOBA

The tourism business in the province’s largest city, Winnipeg, is largely driven by events, says Scott Jocelyn, president and CEO, Manitoba Hotel Association. In 2016, that meant the NHL’s Heritage Classic outdoor game pitting the Winnipeg Jets against the Edmonton Oilers. This year, it means the Canada Summer Games, taking place in Winnipeg July 28 to Aug. 13. The games will take “centre stage” and have the potential to drive great numbers of people — athletes, spectators, etc. — to the city, he said. “Winnipeg has a reputation of doing these events really well.”

New hotel supply continues to come onboard at a steady clip. Completed and/or planned/announced openings for the Winnipeg market include the Club Regent Casino Hotel; Hilton Garden Inn (under construction; 127 rooms); Super 8 Winnipeg East (rebuild; 81 rooms); Hampton Inn Westport Festival – Hedingley (125 rooms); Souris Hotel (under construction; 29 rooms); Best Western Plus Regent (under construction; 140 rooms); Sutton Place Hotel (planned for 2019 opening; 275 rooms).

Another potential tourism driver, he said, is the increased focus the provincial Conservative government has placed on tourism. Since taking power in April 2016, the government has pledged that for every $100 generated by tourism, $4 will go back into the sector.

ONTARIO

In 2016, for the second consequent year, Ontario saw hotel performance growth and an encouraging increase in ADR. While occupancy jumped by 2%, the ADR climbed by 3%, supporting overall growth of over 7%. This was fueled by growth in international visitation, with U.S. travel up by 10% and overseas travel up by 15%, according to Tony Elenis, president and CEO, Ontario Restaurant Hotel & Motel association.

In 2017, the low Canadian dollar and overall business trade will continue to support positive performance from both leisure and business international travel, he said. Overseas numbers are expected to continue to grow, especially from China.

Positive numbers are expected across Ontario, with the Greater Toronto Area and Niagara continuing to lead, and Ottawa expecting higher demand stemming from celebrations surrounding Canada’s 150th anniversary.

“According to forecasts we have seen, Ontario is expected to once again grow hotel performance numbers with ADR of over 4% and RevPAR close to 6% growth. Demand and confidence are playing a key role in driving ADR upwards.”

In 2016, Airbnb presence represented 60% of total accommodation share in Toronto downtown’s core, affecting revenues by 6%. The City of Toronto in working with the industry and is expected to implement a regulatory framework surrounding the sharing economy by the end of 2017.

QUEBEC

On the hotel front, “2016 was a very good year, for room nights, revenue, everything,” said Xavier Gret, general manager, Association des Hoteliers du Quebec. Tourism was strong from Europe, driven by a low Canadian dollar and security concerns about certain overseas destinations. For the year, occupancy rates averaged 57 per cent and average daily rate was $137.83.

Montreal hotel openings include the Renaissance Montréal, William Gray and Boxotel, all in 2016; the Hôtel Mount Stephen, Hôtel Monville, Best Western Plus and AC Marriott, all planned for 2017; and the Complexe Holt Renfrew (end of 2018). In June, the Fairmont Queen Elizabeth is expected to reopen following a renovation.

Gret says 2017 “looks good,” thanks to Montreal’s 375th anniversary celebrations that could potentially drive “lots of tourism.” Other potential tourism drivers, he said, include the launch, in February, of Montreal-Shanghai flights, and the Donald Trump Effect, which could persuade Mexicans to visit Quebec rather than the U.S.

A provincial tourism marketing initiative, Alliance de L’Industrie Touristique du Quebec, launched in 2016, to market Quebec outside the province. The organization is “working hard to promote tourism,” said Gret, and he expects they will “get results” in 2017 and 2018.

NOVA SCOTIA

It’s boom times for Halifax, according to Jeff Ransome, general manager of the Halifax Marriott Harbourfront and Nova Scotia’s rep at the Hotel Association of Canada. Calling Halifax “the bellwether for Nova Scotia,” Ransome said the market, during the past three years, has seen an 11.5% increase in rooms sold, with 2016 recording an increase of almost 4%.

Moreover, Ransome is forecasting a “banner year” for 2017 that could replicate the strong 2016 growth. Driving that anticipated strong year is increased ship-building activity; the Halifax Convention Centre (set to open later this year), which is expected to attract international conferences — the facility has booked more than 25 events for 2018, according to Ransome; the convention centre hotel (around 250 rooms) expected to open early next year; the continued low Canadian dollar; increased Halifax flights to Canadian and international destinations; and city events such as the tall ships regatta this summer. Ransome reports a number of hotel recapitalizations taking place in the market.

On the leisure travel side, “more Canadians are becoming aware of Atlantic Canada” and a renewed sense of nationalism is making “Canadians want to see their own country.”

Helping things, too, is Destination Halifax’s restructured sales and marketing efforts, and the Hotel Association of Nova Scotia launching special marketing initiatives, said Ransome.

NEW BRUNSWICK

From 2015 to 2016, the province saw an overall occupancy rate growth of 3%, says Christie Neate, vice-president of operations at D.P. Murphy Hotels and Resorts and the provincial HAC rep. She added that the province saw a 15% growth in room sales from the U.S. in 2016, compared to 2015, and 7% growth in travellers from other Canadian provinces travelling to New Brunswick.

Neate says 2017 is “shaping up to be fantastic,” with March busy and April shaping up well. Tourists are trying to beat the summer-season rush, so B&Bs are “booking up.” In New Brunswick, supply changes in 2016 were minimal, with a hotel property added in Fredericton. Supply changes forecasted in 2017 will see some supply added in both Dieppe and Fredericton, and in 2018, will also see some supply added in the Moncton market.

The new supply shouldn’t affect the market adversely, with Moncton experiencing strong occupancy and Fredericton likely to experience strong convention business, she said. Business will likely continue strong, driven by a low dollar and travel limitations to the U.S.

Leisure tourism is heaviest in summer, driven by visitors from Quebec, Ontario and New England, and is expected to continue strong.

PEI

For Prince Edward Island, 2016 was a “record breaking year,” with tourism traffic and hotel room nights up, according to Craig Jones, general manger of the Rodd Crowbush Golf & Beach Resort and president of the Hotel Association of PEI.

Jones says increased numbers of American and Canadian tourists are visiting due to the value of their respective dollars (the low Canadian dollar keeps Canucks at home and the high U.S. dollar makes travel to Canada very affordable).

So far, 2017 occupancy is “ahead of last year,” says Jones, who adds that “June is looking strong for conferences in Charlottetown and Summerside.”

No new hotel supply came onstream in 2016, he says, noting that a 12-room boutique hotel, housed in a former convent, is expected to open in Charlottetown in summer. Additionally, “there is lots of talk about hotels in Charlottetown and Summerside reinvesting in their properties, renovating rooms, meeting space and technology.”

Also driving the province’s seasonal tourism industry is a marketing initiative promoting PEI as Canada’s Food Island. Indeed, between the proliferation of festivals — lobster; burgers; the annual Fall Flavours, to name but three — and celebrity chef Michael Smith opening FireWorks restaurant in 2015 at the Inn at Bay Fortune, the province’s culinary scene is in high gear.

NEWFOUNDLAND & LABRADOR

The slumping oil and gas business is affecting business in St. John’s, says Larry Laite, general manager of the Capital and JAG Hotels, and the hotel/motel sector rep at HAC. Outside the city, in 2016, business was strong, especially on the motorcoach side.

Early 2017 saw a bump in business in St. John’s due to the men’s curling brier held in early March, said Laite. A strong U.S. dollar should result in increased motorcoach bookings throughout the province this year. The forecast for St. John’s, meanwhile, is to hold steady in June and July and increase in August. Expected tourism drivers include meetings and conventions and the Canadian Ball Hockey Association tournament. The rest of the province, meanwhile, is expected to have a good year.

On the supply side, in 2016, Holiday Inn Express opened (120 rooms). Under construction is the Best Western Airport (170 rooms) and ALT (about 150 rooms), expected to open in fall; and the 200-room Sandman property, which was announced as a summer opening, but may not open until 2018.

There is speculation that 2017 could be a bumper crop for icebergs, which float down from Greenland and drive tourism, says Laite. The fossil site at Mistaken Point, a UNESCO Heritage Site, could also create interest among adventure archeologists.