Canada’s hotel average daily rate and revenue per available room were the highest for any year on record, according to CoStar’s 2023 data.
For the year (percentage change from 2022):
- Occupancy: 65.7 percent (+7.7 percent)
- Average daily rate: CAD200.08 (+9.7 percent)
- Revenue per available room : CAD131.48 (+18.3 percent)
“Canada hotel room rate growth outpaced inflation in 2023, further cementing the hotel sector’s reputation as a strong hedge against the metric,” Laura Baxter, CoStar Group’s director of hospitality analytics for Canada, said in a statement.
“Due to weakness in the broader economy, consumers have started reining in discretionary spending. For 2024, occupancy is forecasted to contract 1.4 percent in the first quarter and remain flat in Q2, with a return to positive territory in the latter half of the year. Driven by inflation, ADR is expected to grow throughout each quarter. Overall, the hotel sector should continue to outpace the wider economy but will not be entirely immune to weakening consumer and business demand. Fortunately, limited supply-side pressures should act as a cushion to support top-line hotel metrics as the broader economy faces challenges this year.
“The balance between supply and demand was favorable for Canada’s existing hotels, supporting the strong performance in 2023. Delivery of new hotels was down 53 percent compared to the previous peak in 2018, given limited groundbreakings during the pandemic and high development and financing costs. This kept supply-side pressure to a minimum. On the demand side of the equation, some hotels benefited from demand spillover from the residential sector. Due to the lack of affordable housing and rentals, some hotels were used as housing. This dynamic between supply and demand is expected to continue into 2024, but softer RevPAR growth is certain, forecasted to grow 2.2 percent.”
Among the provinces and territories, Manitoba recorded the highest 2023 occupancy level (72.2 percent), which was 10.8 percent above 2022.
Among the major markets, Vancouver saw the highest occupancy (78.5 percent), up 7.8 percent over 2022.
The lowest occupancy among provinces was reported in Saskatchewan (58 percent), up 4.8 percent against 2022. At the market level, the lowest occupancy was reported in Edmonton (+9.4 percent to 56.6 percent).
“Strong key metrics and a positive outlook have resulted in more investment capital earmarked for hotels as opposed to other property types that have not performed as well,” said Baxter. “And since the development pipeline is still constrained due to high development and financing costs, and replacement costs are high, investors are focused on acquisitions as the most straightforward entry point.”