By Nicole Di Tomasso
According to Avison Young’s Canada Hotel Market Report, Canada’s hotel industry demonstrated a strong recovery in 2023, surpassing pre-pandemic levels in key performance indicators (KPIs) such as Average Daily Rate (ADR), Revenue Per Available Room (RevPAR) and occupancy.
“Across all major markets in Canada, there was a notable high single-digit or low double-digit year-over-year growth in occupancy, accompanied by gradual increases in ADR and significant growth in RevPAR,” reads the report. “Hotels demonstrated agility in adjusting ADR daily, positioning them to respond effectively to spikes in demand and inflationary pressures. Consequently, the industry recorded positive financial outcomes driven by continued ADR increases, fuelled by a surge in leisure and small local group demand across several major Canadian markets. Upscale, upper upscale and luxury hotel segments experienced a notable resurgence in occupancy, each recording double-digit year-over-year growth. Overall, the positive year-over-year growth across all performance metrics signals a promising trajectory for the Canadian hospitality industry.”
In fact, Canada’s hotel ADR and RevPAR were the highest for any year on record, according to CoStar’s 2023 data. In comparison to 2022, occupancy was 65.7 per cent (up 7.7 per cent); ADR was CAD$200.08 (up 9.7 per cent); and RevPAR was CAD$131.48 (up 18.3 per cent).
“Canada hotel room-rate growth outpaced inflation in 2023, further cementing the hotel sector’s reputation as a strong hedge against the metric,” says Laura Baxter, CoStar Group’s director of Hospitality Analytics for Canada. “The balance between supply and demand was favourable for Canada’s existing hotels, supporting the strong performance in 2023. Delivery of new hotels was down 53 per cent compared to the previous peak in 2018, given limited ground breakings 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 benefitted 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 in 2024, but softer RevPAR growth is certain, forecasted to grow 2.2. per cent.”
Baxter continues, “Strong key metrics and a positive outlook have resulted in more investment capital earmarked for hotels as opposed to other property types that haven’t performed as well. 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.”
Crunching the Numbers
Collectively, Hotelier’s Top 30 companies posted estimated gross sales of $16.4 billion for 2023, with our top three companies (Marriott Hotels of Canada, Four Seasons Hotels and Resorts and Accor Hotels North & Central America) accounting for an estimated $8.8 billion of that total.
Marriott Hotels of Canada topped the Top 30 Report this year with gross sales of $4 billion, up from $3.03 billion in 2022.
“We reported fantastic results in 2023 as demand for travel and our industry-leading portfolio grew. Full year global Revenue Per Available Room (RevPAR) rose nearly 15 per cent and net rooms grew 4.7 per cent, the company’s highest net-rooms growth since 2019,” says Anthony Capuano, president & CEO, Marriott International. “Demand for all types of travel remained strong, even as the rebound impact from the pandemic waned throughout the year. Group demand was again strong, and full year global group revenues rose 19 per cent compared to 2022. In the business transient segment, demand from small- and medium-sized corporates remained robust, and while large corporates were still lagging pre-pandemic levels, they continued to post year-over-year volume increases. Solid gains in both Average Daily Rate (ADR) and room nights drove global business transient revenues 18 per cent higher compared to 2022.”
Four Seasons Hotels and Resorts reported estimated gross sales for 2023 of $3.3 billion, up from $3.09 billion in 2022, earning itself second place in our Top 30 rankings.
Building from the strength of its leading industry position, Four Seasons looks ahead at 2024 with a focus on enhanced portfolio and pipeline development, residential leadership and immersive luxury experiences.
Four Seasons is expanding its global footprint while investing in its current portfolio of 128 hotels and resorts in 47 countries. With a robust and focused development pipeline of more than 50 hotels and resorts at various stages of planning development, the company is strategically expanding into key destinations that’ll further strengthen its position.
“Grounded in Four Seasons history of industry leadership, our vision is to be the most aspirational luxury hospitality and residential brand through genuine and unparalleled service experiences,” says Alejandro Reynal, president & CEO, Four Seasons. “The key to our success has and always will be our people and culture. This will continue to guide our path forward as we further solidify Four Seasons legacy of authentic and unscripted care for which we are renowned.”
Driven by resolutely solid demand in 2023, AccorHotels was able to set new records in terms of operating and financial performances. All regions and segments enjoyed strong growth after a year in 2022 marked by the post-COVID pandemic recovery. All performance indicators were in line with, exceeded group guidance in 2023.
The global brand reported estimated gross sales of $1.5 billion across its 29 Canadian properties in this year’s Top 30 Report, up from $1.4 billion in 2022, claiming the third spot in this year’s report.
“The group achieved growth in all segments and geographies, illustrating the strength of its asset light model, the efficiency of its organizations based on the two divisions, Premium, Midscale and Economy on the one hand, and Luxury and Lifestyle on the other, the desirability of its brands, the strength of its distribution and loyalty tools, as well as its financial discipline,” says Sébastien Bazin, Chairman & CEO, Accor.
In 2023, Accor opened 291 hotels, corresponding to 41,000 rooms (net network growth of 2.4 per cent in the last 12 months), according to the group’s full-year 2023 results. At the end of December 2023, the group had a hotel portfolio of 821,518 rooms (5,584 hotels) and a pipeline of 225,000 rooms (1,315 hotels).
“While the geopolitical backdrop remains complex, 2024 is rich in major international events which should continue to fuel growth,” says Bazin.
Smaller hotel companies showed significant growth over 2022, such as Toronto-based K2 Group, which grew its sales from $87 million in 2022 to $123 million at year-end 2023, and Montreal-based Artifact Group (formerly Sageblan Investments), which grew its sales from $72.2 million in 2022 to $138.2 million at year-end 2023.
“We consider our properties to be valuable treasures, and ‘Artifact’ better describes our commitment to detail and quality,” says Gaurav Gupta, president, Artifact Group. “While our name [has changed], our dedication to providing exceptional service for our guests, while prioritizing the well-being and growth of our employees as we continue to identify, acquire and re-new properties remains steadfast. We look forward to continuing to create thoughtful and inspired spaces that stand the test of time under our new name.”
A Bright Future
While Canada’s hotel industry will continue to face cost pressures, there’s continued growth on the horizon.
“Looking ahead, while the longer-term future appears promising, challenges may arise with travellers (individuals and corporations) seeking to reduce costs amid uncertainty in the economy,” reports Avison Young. “While growth is anticipated in 2024, it may not be as robust as in the previous year, with the market likely to move towards more normalized conditions.”
ADR became the main driver of growth for 2023, while occupancy growth slowed. In 2024 and 2025, Baxter says ADR is likely to remain as the main driver of growth. Fortunately, after four-consecutive months of year-over-year declines, Canada’s hotel industry reported a 2.7-per-cent increase in occupancy (64 per cent), according to CoStar’s April 2024 data.
Additionally, leisure tourism is likely to continue being the primary driver of global hotel performance, but business travel spend is projected to fully recover in 2024, according to the Global Business Travel Association (GBTA).
In the year ahead, “travellers will prioritize experiences that align with their personal values,” reads JLL’s Global Hotel Investment Outlook 2024. “Hotels that effectively articulate their commitment to sustainability, wellness and authenticity will gain a competitive edge, enabling them to expand market share and enhance asset values while accessing new sources of capital.”
