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TORONTO — As 2023 draws to a close, regional HVS leaders across the globe have taken a look back at how the global hotel industry fared this year and opine on the outlook for 2024 in its latest report.

While the U.S. experienced muted 2023 RevPAR growth relative to 2022 gains, most other global markets recorded extraordinary RevPAR growth, well above 10 per cent, primarily fuelled by strong ADR gains. While traction activity cooled across the Americas and Europe, the Asia Pacific saw a significant strengthening as this region’s markets moved beyond pandemic-era restrictions.

In Canada, the year 2023 set new benchmarks for the hotel industry. After reaching a RevPAR peak in 2022, the market RevPAR is on pace to grow another 15 per cent in 2023, driven by strong growth in both occupancy and ADR. The leisure segment noted the benefit of increased trans-border and international visitation, while the domestic market continues to provide a key base of demand. The major metropolitan areas, including Toronto, Montreal and Vancouver, also drove a large portion of the gains in 2023 as a result of strong meeting and group demand, much of it pent up from prior-year cancellations. These major markets are also seeing an improvement in commercial/corporate demand, especially in the fall. While demand is not back to historical highs, the return of key corporate accounts is beneficial, as a decline in the domestic leisure market is possible given the softening economic conditions and expectation of a recession. Supply growth in Canada has been muted throughout COVID with soaring construction costs. A conservative lending environment and higher interest rates also helped suppress the pace of new development.

Transaction activity was strong in the first half of 2023, with some notable full-service trades in Toronto and Montreal. However, the pace of activity slowed in Q3. HVS expects overall transaction volume will be $1.5 billion for the year, which is slightly below 2022, and the forecasted $2 billion in trades.

The outlook for 2024 is cautious. Economic forecasts for the country indicate minimal GDP growth, with an anticipated slowdown in the first half of the year. Inflation is expected to fall back to the target level of 2.5 per cent, and while the interest-rate outlook is still uncertain, interest-rate hikes appear to have peaked. The interest rate has the potential to decrease modestly beginning in the late spring or early summer. This cloudy economic picture is likely to dampen the domestic leisure travel that has been a large contributor to the strength of the hotel industry in recent years.

That said, growth is still anticipated in the inbound international travel segment. Meeting and group demand is stabilizing, with modest growth anticipated, while the commercial segment is expected to see an uptick given that it hasn’t recovered to the same degree as other segments. As a result, we expect RevPAR growth in the range of two per cent to four per cent. Supply growth is expected to track at a similar pace to 2023. With the record-setting RevPAR figures in recent years, the tightening of short-term-rental restrictions, and the anticipation of interest-rate declines, the pipeline for development is expanding. On the transaction side, several larger deals are expected to close early in 2024, which should result in a comparable volume to 2022 and 2023.


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