PKF: A tale of 13 cities

The PKF Outlook Forum held last month in Toronto predicted positive numbers for 2015, although outlooks varied in major Canadian markets.

TORONTO—The global hotel industry is in “a very good space with exciting opportunities in the next three to four years,” and Canada is no exception, Nicole Nguyen told delegates to the PKF Outlook Forum last month.

The supply side of the equation has been muted since 2008, with about 3,000 rooms being added each year, but even that small number still affects certain markets. Next year should see more activity than usual on the supply side, with 5,800 new rooms projected for 2015.

The good news is that demand growth exceeds supply, with 2014 demand forecast to rise by 2.7 per cent and 2015 on track for the same growth.
At 65 per cent occupancy, Canada is back to record levels and has increased steadily since 2012.

In 2014 ADR increased by 2.5 per cent—and it is projected to continue that growth in 2015.

Major markets are driving RevPAR and Canada is looking at strong performance and significant growth, Nguyen said.

Here’s a look at the outlook for 13 top Canadian cities from east to west.

St. John’s is a small, 2,000-room market where the addition of even one new property can make a big difference. It is tied with Vancouver for second place among Canadian cities, with an RevPAR of $107 anticipated for 2015 (see table). St. John’s expects less than 2 per cent RevPAR growth in 2015. Demand has been flat in St. John’s because the Long Harbour construction project has ramped down.

Halifax is a 5,000-room market, which will see a 7 per cent increase in supply in 2015. Shipbuilding contracts will start to have an impact, and the Convention Centre is under construction. At $81 RevPAR, it ranks lowest of any major Canadian city besides Winnipeg.

Niagara Falls shows strong demand and RevPAR growth, partly because there is no new supply.

Quebec City is looking at 3 to 4 per cent RevPAR increase next year. It has had limited supply since Loews is expanding as an independent; the Courtyard by Marriott is undergoing renovations and the Chateau Frontenac underwent some significant renovations, but is now back in service. The Chateau helps the overall market, and Quebec City had a decent performance over the summer. Oversupply is not bad, and taking out product to invest in renovations is a good thing, PKF’s Brian Stanford said.

Montreal’s outlook is positive because of subtraction—in the past three years, the city has lost 2,200 hotel rooms including a Holiday Inn and a Delta. In 2015, Montreal's RevPAR is expected to increase by 4 per cent. Within the downtown hotel sector, the Ritz-Carlton is back in the market after a significant investment in the property. But even in 2017, Montreal is still expected to have 400 fewer rooms than in 2013.

Ottawa can anticipate a RevPAR increase of 4 per cent next year, and the fourth highest RevPAR ranking at $103. A large Courtyard by Marriott is planned for eastern Ottawa.

Toronto’s RevPAR is $100, but PKF Toronto stats blend information from 70 per cent suburban hotels and just 30 per cent downtown properties. “Downtown Toronto RevPAR outperforms every city but Calgary,” said Stanford. He added that the suburban markets are finally gaining traction, with an uptick in the level of commercial traffic. While the Pan Am Games in 2015 will have a huge impact on tourism with 1.4 million attendees, Stanford does not expect that to translate into hotel nights since the vast majority of attendees will be local or regional. “This means that 2016 isn’t going to have the same shadow impact that Vancouver had after the Winter Olympics,” he added.

Winnipeg’s 2015 RevPAR projection is the lowest among major Canadian centres, at $76, and 2 per cent RevPAR growth is expected for 2015.

Saskatoon saw a 4 per cent boost in RevPAR in 2014, but is expected to have a 4 per cent drop in 2015. This is because the city will have seen seven new properties come onstream, including suburban Martensville, in the past year. Saskatoon is also the potash capital, and potash prices are not as strong as they were, said David Ferguson of PKF’s Vancouver office.

Regina is not as dependent on potash, Ferguson added. An oversupply of hotels contributed to a forecast of negative RevPAR growth for 2015, and a relatively low anticipated RevPAR of $87.

Edmonton and Calgary should have very good room demand in 2015, despite more than 5 per cent supply growth.

Calgary has the highest RevPAR ranking at $119, but RevPAR growth hovers around 1 per cent for 2015.

Vancouver is tied with St. John’s with the second highest RevPAR among major cities, at $107. The city expects 4 per cent RevPAR growth next year. The Vancouver market has been in decline since 2010, and the more positive 2014 results were a surprise. Occupancy was 69 per cent in 2013, 72 per cent in 2014 and 72 per cent projected for 2015. The city has not seen such good growth since 2005/06—at the property level, in terms of convention activity and in leisure travel. Operators are asking for higher rates, leading to growth in ADR as well, Ferguson noted.

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Top left to right, Bill Stone, CBRE, David Larone, Fran Hohol, David Ferguson, all from PKF.  Bottom row, left to right, Brian Stanford and Nicole Nguyen, PKF.

Top left to right, Bill Stone, CBRE, David Larone, Fran Hohol, David Ferguson, all from PKF. Bottom row, left to right, Brian Stanford and Nicole Nguyen, PKF.

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