By Cindy Schoenauer, CBRE Vancouver
VANCOUVER —The strongest year-to-date (YTD) performance results in western Canada are primarily within southern B.C., (including Metro Vancouver, Vancouver Island and Whistler) and the Alberta Resorts region. Metro Vancouver, Whistler and the Alberta Resorts region are experiencing a second consecutive year of double digit revenue per available room (RevPAR) growth. The strongest performance results are generally in the markets that have strong demand from leisure travellers. The markets are benefitting from increased visitation encouraged by favourable exchange rates for both U.S. and international visitors, and increased air capacities at Vancouver International Airport.
The City of Vancouver is posting the strongest GDP growth of the 13 census cities tracked by the Conference Board of Canada. Vancouver International Airport has also increased air capacity from key source markets including China, Japan and South Korea. Continued growth in both occupancy and ADR is forecast for Vancouver in 2016, as shown in CBRE’s 2016 Major Markets Outlook. We expect this high level of growth will continue in the foreseeable future since Vancouver is a high barrier to entry market, where developers face high land and construction costs. The lack of new supply will contribute to a continued strong outlook for this market.
At the opposite end of the spectrum, certain resource markets in B.C. are mimicking the performance declines experienced in Alberta and Saskatchewan. For example, the RevPAR in the Prince George accommodation market is down 12.8 per cent based on YTD June 2016 results. Weak natural resource prices, notably for natural gas and several minerals, are resulting in mine closures or suspension of operations, and lower drilling activity, which has delayed any investment decisions by proponents of large scale LNG projects. Other northern B.C. markets are experiencing comparable or greater decreases in RevPAR. New room supply is being developed/opening in anticipation of large-scale LNG projects, which has exacerbated the weak results in some of these markets.
For 2016, Alberta is in the midst of what most forecasts indicate will be their second consecutive year in recession, and the performance of the accommodation sector is indicative of the difficult economic environment. YTD June 2016 results show RevPAR declines at 20.8 per cent for the province, excluding the Alberta Resorts region. The Alberta Resorts region is generating June YTD RevPAR growth of 13.5 per cent over the same period in 2015. The Calgary market is coping with both the downturn in economic activity coupled with strong growth in new room supply, which is projected at nearly 7 per cent in 2016. The Edmonton market will also see supply growth in 2016, at more than 4 per cent, placing downward pressure on RevPAR. Double-digit RevPAR declines are occurring in several other markets throughout Alberta thus far (YTD June) within the province.
Saskatchewan is seeing a similar trend of RevPAR declines, though not as profound as Alberta. Overall, RevPAR in the province has declined by 11.3 per cent according to YTD June 2016 results. The Saskatoon market is seeing strong declines in RevPAR, down 16.8 per cent at YTD June 2016. Overall supply growth of 9.0 per cent in 2015 and a further 8.0 per cent in 2016, along with sluggish economic performance, are the primary factors impacting Saskatoon’s hotel performance. The Regina market is projected to have a 10.0 per cent increase in room supply in 2016. The June YTD results, however, show demand growth thus far in 2016, which has lessened the negative impact on RevPAR performance.
The accommodation market for Manitoba results has shown no growth up to June 2016. A closer look, however, shows declines in the Brandon and Other Manitoba markets has been offset by positive RevPAR growth in Winnipeg. According to the Conference Board of Canada, the Winnipeg economy will see gains in GDP growth for 2016, due to strength in the manufacturing industry, specifically as it relates to aerospace and bus manufacturing.
On a regional basis, the robust growth levels that we are seeing in B.C. have been more than offset by declines we are seeing in Alberta and Saskatchewan, for an overall regional decline of 3.5 per cent in RevPAR, based on YTD June 2016 results.
The chart below provides a snapshot of the CBRE’s 2016 Major Market Outlook for Western Canada.
Cindy Schoenauer, AACI, is Director for the CBRE Hotels Valuation & Advisory Services Team. The Western Canadian markets are covered through the Vancouver CBRE office. Email: firstname.lastname@example.org