Canadian industry outlook positive for 2017: CBRE

TORONTO — The outlook for Canada is positive, according to CBRE Hotels experts speaking at the 2017 Canadian Accommodation Industry Outlook breakfast Sept. 13 in downtown Toronto.

One bright spot in an otherwise weak Alberta outlook has been the province's resorts, such as the Delta Lodge Kananaskis.

One bright spot in an otherwise weak Alberta outlook has been the province's resorts, such as the Delta Lodge Kananaskis.

TORONTO — The outlook for the Canadian accommodation industry for next year is positive, driven by, among other factors, a forecast increase in travel and rise in national GDP, according to a panel of CBRE Hotels experts speaking at the 2017 Canadian Accommodation Industry Outlook breakfast, held Sept. 13 in downtown Toronto.

Although recently stalled below 2 per cent nationally, Canada’s GDP is predicted to rise to about 2 per cent in 2017.

On top of that, overall travel growth is expected to hit 3 per cent next year, double the figure for 2016, according to the panel. Business travel is expected to rise about 2.5 per cent, with leisure travel “looking solid” for the near term.

Moreover, accommodation demand growth of 2.4 per cent to 2.6 per cent is being forecasted. The low value of the Canadian dollar against the U.S. dollar is expected to continue driving U.S. travel to Canada, while simultaneously discouraging Canadians from leaving the country for their leisure travel needs.

Strong demand is expected to drive occupancy Canada-wide. Similarly, market conditions, and Canada’s safe-harbour status (thanks to political stability) are driving investment, demand for which has never been stronger, especially from offshore investors, according to the panel. Hotels generate returns of 3 per cent to 4 per cent, and that, coupled with the ability to grow income in the next couple of years, has spurred first-time buyers to enter the Canadian accommodations market.

On the supply side, nationally, Canada has been operating at “functional capacity,” with occupancy at about 65 per cent. Too, access to capital has improved, with “lots of options” to finance hotel projects of less than $20 million. Across the board, there has been downward pressure on cap rates.

Regionally, in Atlantic Canada, GDP growth of about 1.5 per cent is expected for 2017, along with limited supply growth. Halifax, expected to see RevPAR growth of 3 per cent next year, is benefiting from the shipbuilding contract that’s spurring local economic activity, as well as the convention centre expected to open in 2017. Regional investment, in Atlantic Canada, totaled $7.6 million as of August 2016 year-to-date.

In 2017, Central Canada, comprising Ontario and Quebec, is expected to see occupancy rates of 67 per cent, ADR of 2 per cent and RevPAR growth of 4.5 per cent. Regional investment totaled almost $649 million as of August 2016 year-to-date. Overall, “a lot” of offshore capital is looking to invest in the region’s accommodation market. “It’s a good time to be a seller,” concluded the panel.

In Western Canada, the story continues to be Alberta’s continuing soft accommodation sector, driven by the struggling oil sector and its spinoff economic effects. RevPAR, occupancy rates and ADR are all expected to perform weakly in 2017. One bright spot, however, has been the province’s resorts.

Regional investment has totaled almost $30 million as of August 2016 year-to-date, with “not a lot” of transactions likely coming.

In contrast, B.C. has seen strong growth, largely driven by the Vancouver market. The province is forecasted to experience GDP growth of 2.5 per cent, with Vancouver’s RevPAR expected to hit $147 in 2017.