NATIONAL MARKET FORECAST

In 2018, national occupancy remained steady at 66 per cent and Revenue Per Available Room (RevPAR) increased by 5.5 per cent. This was largely driven by strong occupancy and rate growth across many major markets.

While many markets saw substantial supply growth in 2018 — often located within major urban centres — demand grew to match the supply increase. Across the country, 2018 saw the beginning of a shift in demand-generating industries. As resource sectors, international trade and consumer spending faced challenges and the non-residential construction and professional, scientific and technical-services industries were on the rise. This was especially true for major markets such as Vancouver, Toronto, Montreal and Ottawa.

Looking forward to the balance of 2019, RevPAR in Western Canada is expected to grow two per cent, to $105. British Columbia and Manitoba are projected to grow RevPAR, while Alberta and Saskatchewan are projected to experience a decline. In Eastern Canada, all provinces except Newfoundland and New Brunswick are expected to see RevPAR growth.

While Vancouver and Toronto, remain the top-performing markets, the two top growth markets in 2019 are P.E.I. and Vancouver, with RevPAR gains forecast at six per cent and seven per cent respectively. Limited new supply entering both markets in 2019 is allowing Vancouver operators to drive rates and Charlottetown operators to drive occupancy, yielding RevPAR growth for both markets.

Nationally, supply and demand are in balance, with both forecast to increase just below two per cent. Average Daily Rate (ADR) is forecast to continue to show national growth of 2.5 per cent. This is forecast to result in a maintained 66-per-cent occupancy nationally and RevPAR growth of two per cent in 2019, reaching $110.

NATIONAL

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy64%64%66%66%66%
ADR$142$146 $155$162$166
RevPAR$91$94$102$107$110

The forecast for the 13 major markets consists of six cities in Western Canada and seven cities in Eastern Canada, all of which are considered to be the strongest influencers of national performance.

Combined, Canada’s 13 major markets represent an estimated 42 per cent of total national rooms supply. As a combined total, these markets grew two per cent in demand and increased rates by 4.5 per cent, resulting in five-per-cent RevPAR growth in 2018.

Of the Western major markets, Vancouver (13 per cent), Calgary (7.5 per cent) and Regina (six per cent) saw the most significant RevPAR growth. Edmonton and Winnipeg each grew one per cent, while Saskatoon declined less than one per cent.

In the East, Quebec City and Toronto had the greatest RevPAR growth — both up seven per cent. Halifax grew four per cent, Niagara Falls grew two per cent and Montreal was relatively flat with a one-per-cent RevPAR decline. Ottawa declined three per cent in RevPAR relative to a strong 2017 with Canada 150 and multiple other large-scale events. St. John’s, N.L. declined 20 per cent in RevPAR due to both a significant volume of new room supply and a contraction in demand in 2018.

Overall, Canada’s major urban markets are projected to see moderate RevPAR growth in 2019. Occupancy is expected to dip slightly as supply and demand come into balance. The expectation is for strong ADR growth of approximately three per cent, resulting in a projected two-per-cent increase in RevPAR to $123.

13 MAJOR MARKETS

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy69%70%71%71%70%
ADR$151$156$164$172$176
RevPAR$104$108$116$122$123

For the balance of the other Canadian markets, demand growth is projected at approximately two per cent in 2019, which is offset by one-per-cent growth in market supply. As such, occupancy is expected to remain flat at 63 per cent. These markets are expected to see steady ADR growth, increasing three per cent to $158, resulting in a $3 lift in RevPAR to $100.

OTHER MARKETS

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy59%59%62%63%63%
ADR$137 $140$148$155$158
RevPAR$81$82$92$97$100

Forecast by Property Type
In 2018, full-service hotel-room supply grew by two per cent and demand grew three per cent. Occupancy increased one point to 69 per cent, while rate grew almost five per cent to $176. RevPAR in 2018 finished at $121, six-per-cent growth over 2017.

The full-service segment in 2019 is expecting supply growth of three per cent, with demand-growth projected to keep pace at 2.5 per cent. With supply and demand in balance, occupancy is expected to remain flat at 69 per cent. ADR is projected to grow 2.5 per cent ($4) to $180 nationally and RevPAR is expected to finish at $124, equating to two-per-cent growth over 2018.

FULL-SERVICE HOTELS

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy66%67%68%69%69%
ADR$151$158$168 $176$180
RevPAR$100$106$114$121$124

Demand for limited-service hotels grew by two per cent in 2018, while supply growth was less than one per cent. As a result, market occupancy increased one point to 62 per cent. After achieving a $4 lift in ADR in 2017, ADR grew by a further $5 in 2018. RevPAR increased 5.5 per cent as a result.

In 2019, both market supply and market demand are projected to grow approximately 1.5 per cent, keeping market occupancy unchanged at 62 per cent. With a projected two-per-cent growth in ADR, RevPAR for limited-service hotels is projected to increase by two per cent to $77.

LIMITED-SERVICE HOTELS

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy59%58%61%62%62%
ADR$114$114$118 $123$125
RevPAR$67$67$72$76$77

MAJOR MARKET FORECASTS

Overall, Canada’s major urban markets are projected to experience continued strong levels of RevPAR growth in 2019, led by growth in markets such as Vancouver, Toronto and Montreal. RevPAR declines in Ottawa, St. John’s and Saskatoon will temper the growth nationally.

Vancouver
GDP growth in Metro Vancouver is expected to remain healthy over the next two years, with growth rates of 2.3 per cent in 2019 and 2.4 per cent in 2020. While a softer housing market, moderating employment gains, higher interest rates and elevated levels of household debt are slowing consumer spending, other sectors are taking the lead. Forecasts for growth in the professional, scientific and technical services industry are estimated at 5.4 per cent in 2019 and 4.3 per cent in 2020, leading Vancouver’s economic growth. Seven local digital projects have received funding from the Digital Technology Supercluster program, totalling $40 million.

Transportation and warehousing are also expected to remain strong, growing three per cent in 2019 and 2.5 per cent in 2020, along with non-residential construction activity. Notable developments include the $500-million Burrard Place mixed-use development, the $2.8-billion Broadway Subway and continued work on Vancouver International Airport’s $5.6-billion expansion plans.

Room demand is projected to grow one per cent in 2019, compared to two per cent in the previous year. Conference and convention activity, in addition to strong performances in the leisure and corporate segments are contributing to demand growth. With limited new net supply, overall occupancy for Metro Vancouver is projected to reach 81 per cent for year-end 2019 — a new record high.

Metro Vancouver hoteliers continue to be aggressive with room pricing, albeit at a slightly subdued pace relative to recent years. Overall, ADR is projected to increase by 6.5 per cent in 2019 — equating to a lift of nearly $14 — following ADR growth of 11 per cent (or $21) in 2018 and $16 in 2017. Overall, market RevPAR is projected to be $182 in 2019 — up seven per cent over 2018.

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy76%79%79%80%81%
ADR$163$174$191 $221$226
RevPAR$124$137$151$170$182

Calgary
Calgary’s economy improved moderately in 2018 and GDP grew 2.3 per cent. Due, in part, to government-mandated production cuts in the oil and gas sector, GDP growth of 1.5 per cent is expected in 2019. Employment growth in 2018 was modest at one per cent compared to 4.5 per cent in 2017. Population growth is also expected to increase slightly at a steady 1.9-per-cent per year over the next few years, however, a consequence of population growth is that the unemployment rate will remain high at 7.5 per cent. It’s projected to decline slightly over the next few years, however, despite the decline, the unemployment rate will be higher than the national average in 2023.

Since 2015, output in the construction sector has consistently declined. This trend will continue into 2019 as a number of infrastructure projects are nearing completion by year end. On a positive note, new projects, such as the 9th Avenue S.E. bridge and the new Calgary Cancer Centre, are set to begin construction and will help to increase output levels over the next few years.

In the accommodation sector, supply growth was modest in 2018 at less than one per cent, as the closure of the Travelodge Hotel Calgary MacLeod Trail offset openings in the airport market. Despite only modest supply growth, demand grew six per cent, and occupancy increased more than three points in 2018 to finish at 63 per cent. Supply growth is projected to outpace demand growth in 2019, leading to a drop-in occupancy to 61 per cent.

In 2019, ADR for Greater Calgary is projected to improve by less than one per cent due to mixed results in each submarket. Overall, RevPAR is projected to decrease by approximately three per cent to $89.

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy64%59%59%63%60%
ADR$158$145$143 $146$147
RevPAR$102$85$85$92$89

Edmonton
The Greater Edmonton area saw moderate economic growth at 1.3 per cent in 2018 after a very strong 2017. Due to oil-output declines in 2015-16, the province implemented production cuts in the beginning of 2019 in order to offset the decrease in oil prices. The manufacturing sector is expected to grow at a decent pace in 2019, however several sectors, including construction, are forecast to have declining outputs for the fifth year in a row, with stalls in investment and a drop in housing starts.

The weaker economy has attracted less migrants and the trend will continue for the next few years. As a result, employment growth in the Edmonton area is forecast to slow 0.7 per cent in 2019, compared to 2.5 per cent in 2018. The unemployment rate will also see little movement, projected at 6.6 per cent by year end.

Hotel supply is projected to increase by four per cent in 2019. In fact, supply has grown by more than 20 per cent since 2013, with the greatest increases coming out of the south and west markets. Supply growth in 2019 is balanced across the downtown, south and west markets.

In 2018, RevPAR grew positively for the first time in four years, albeit a moderate increase, at just one per cent. RevPAR is projected to contract once again in 2019 due to the increase in market supply and an expected decline in average rate. Market ADR is projected to contract by one per cent, while supply growth is projected to outpace demand growth, bringing occupancy for the Edmonton market to 57 per cent. Overall, RevPAR for the Edmonton market is projected to decrease close to four per cent to $73.

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy63%59%57%59%57%
ADR$136$130$130 $129$127
RevPAR$86$77$74$75$73

Regina
After averaging less than 0.3-per-cent annual GDP growth over the last four years, growth of 2.3 per cent is projected for 2019. Despite struggles in the value of commodity prices, threats to canola exports to China and a cooling manufacturing sector, the city is expecting gains in employment, growth in the services sector and improvement in retail sales to help drive the economy.

In the accommodation sector, the market saw a cumulative increase in supply of more than 40 per cent between 2013 and 2017, while at the same time room-demand levels were, for the most part, sluggish. Market occupancy in Regina dropped from a high of 75 per cent in 2013 to 56 per cent in 2017.

The city hosted a number of major events such as the Congress of the Humanities and Social Sciences, Tim Hortons Brier, the Memorial Cup and the CP Women’s LPGA golf championship in 2018. Demand increased seven per cent and, with no new supply for the first time in five years, market occupancy improved to 60 per cent.

Unfortunately, the event-related demand in 2018 is not expected to be fully offset by other new demand in 2019. Therefore, market occupancy is projected to drop three points to 57 per cent.

Market ADR has consistently decreased year-over-year since 2015 and this trend is expected to continue into 2019. Overall, RevPAR is projected to decrease nine per cent in 2019.

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy62%59%56%60%57%
ADR$131$128$121 $120$116
RevPAR$82$75$68$72$65

Saskatoon
Saskatoon’s GDP is forecast to grow 2.3 per cent in 2019 and 1.7 per cent in 2020, however, current uncertainty surrounding the future of commodity prices is weighing on Saskatoon’s economic outlook. In other sectors, manufacturing; the finance, insurance, and real-estate industry; retail; and the professional, scientific and technical- services industries are all projected to improve — though at a moderate pace. Key non-residential projects in the city include the $300-million Parcel Y mixed-use development and the $18-million John G. Diefenbaker Airport renovation.

Saskatoon’s hotel-supply growth has moderated slightly after significant increases in 2015 and 2016. Over the next two years, supply is expected to grow between three to four per cent, with one hotel opening per year: the Alt Hotel, which opened in early 2019 and the Sandman Signature Saskatoon South, which is expected to open in early 2020. Demand growth is projected at 2.5 per cent in 2019 (lower than projected supply growth) pushing occupancy down to 60 per cent by year-end 2019 — a one point decrease over 2018.

Lower occupancy rates are forecast to be offset by moderately rising room rates. After steady declines in ADR from 2014 to 2018, the rate is projected to grow by one per cent in 2019. With the increase in rate and decrease in occupancy, RevPAR is expected to grow 0.5 per cent (a $1 increase). If the forecast increase is achieved, 2019 would be the first year of RevPAR growth for Saskatoon since 2013.

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy65%60%60%61%60%
ADR$146$133$125 $124$125
RevPAR$95$79$75$75$76

Winnipeg
The Winnipeg economy posted three-per-cent GDP growth or higher the past two years and is expected to reach 1.9 per cent in 2019. In part, the strong construction sector — mainly in non-residential projects — is contributing to the growth expected in 2019. Winnipeg boasts an affordable housing market, which is attractive for international migration as the city saw 17,781 new residents between 2016 and 2018 and is expected to continue to grow in population.

In the hotel sector, demand declined by five per cent in 2018 following a big year for growth in 2017. Demand growth of 2.5 per cent is projected in 2019, however, supply growth in the market is projected to be three per cent, holding market occupancy at 70 per cent. Market ADR is projected to increase by less than one per cent, remaining flat at $129, keeping RevPAR flat at $90 in 2019.

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy63%66%71%70%70%
ADR$126$124$126 $129$129
RevPAR$79$82$89$90$90

Toronto
The economy for Toronto slowed in 2018, mainly due to a cooling in the housing market. On a positive note, the transportation-and-warehouse sector grew by 8.2 per cent in 2018 and is expected to grow by an additional 6.7 per cent this year, contributing to expected 2.4-per-cent growth in GDP of 2.4 per cent.

Passenger traffic through Toronto Pearson International Airport grew in 2018 by 2.4-million visitors. This is in line with the trend of passenger-numbers increasing by at least five per cent feach of the last five years. Overnight visitation to the city increased by 1.2 per cent in 2018 and is expected to grow by a further 2.6 per cent in 2019. Tourism Toronto is partnering with Expedia to market the city as a stopover destination for international travellers, which may help boost overnight stays in the coming years.

In 2018, demand growth slightly edged out supply growth, pushing market occupancy up by half a point. The reverse is expected in 2019, bringing market occupancy back down a half point to 75 per cent for 2019.

Occupancy at 78 per cent in Downtown Toronto in 2018 and projected again in 2019 has created some compression, pushing demand out of the downtown core and into the suburban markets. Each sub-market, comprised of Toronto Airport, GTA West and GTA East/North, is projected to achieve occupancy at 71 per cent or better in 2019.

While at a slightly tempered pace relative to the recent past, Toronto overall is projected to achieve two-per-cent ADR growth in 2019. Market RevPAR is projected to reach $140 — representing growth of $34 since 2015.

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy71%74%76%76%75%
ADR$149$160$172 $183$187
RevPAR$106$119$130$139$140

Niagara Falls
Overnight visits were up 1.5 per cent in 2018 due to new attractions and Niagara’s first-ever International Fireworks Competition. Overnight visits to the region are expected to grow at a healthy two per cent, attributed in part to U.S. and
overseas visitation.

In recent years, there has been a considerable amount of interest in new hotel development in the Niagara Falls market but few projects have materialized. Supply is projected to increase by only 45 rooms in 2019. With a projected one-per-cent demand growth, market occupancy is expected to increase one point to 68 per cent. Occupancy at this level is strong for a leisure-oriented and seasonal market.

For the most part, annual rate growth in Niagara Falls has been strong dating back to 2012. The market achieved approximately four-per-cent growth in ADR in 2018 and is on pace to achieve the same in 2019. Operators have done well to leverage peak demand periods to lift rate.

RevPAR is projected to increase five per cent to $117 in 2019.

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy64%67%68%67%68%
ADR$157$160$161 $167$173
RevPAR$101$107$109$112$117

Ottawa
Led by moderate advances in the public administration and construction sectors, Ottawa’s economy is forecast to see modest real GDP growth of 1.7 per cent in 2019 and 1.9 per cent in 2020. In the latest federal budget, spending initiatives were modest as the government turns to start controlling its deficit. After expanding by more than three-per-cent annually for the past three years, the public-administration industry is expected to increase by only 0.8 per cent in 2019. However, other industries are partially compensating. Non-residential construction is currently led by the city’s massive light-rail project, which is proceeding to Stage 2.

Spurred by the city’s growing high-tech sector, the professional, scientific and technical-services industry is forecast to grow by 2.7 per cent in 2019. Notable developments include BlackBerry and the federal government’s joint $350-million investment into autonomous-vehicle technologies in Kanata, Shopify’s continued success and Interset’s acquisition by a U.K.-based software maker.

It is forecast to be another significant year of supply growth in 2019, with the opening of the dual-brand Homewood Suites and Hilton Garden Inn and the Holiday Inn Express & Suites Downtown. Room supply is projected to grow six per cent in 2019 — a slightly subdued pace from the seven-per-cent growth experienced in 2018. Demand is projected to grow at a more moderate three per cent in 2019, slowing after the strong 2017 and 2018 growth of more than five-per-cent per year. As a result, market occupancy is projected to drop two points to 72 per cent.

Driven by consistent rate growth in each of the submarkets, ADR is projected to increase two per cent to $173 in 2019. However, due to the significant increase in market supply, RevPAR is expected to finish at $123 in 2019 — a one-per-cent decline from 2018.

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy72%72%75%74%72%
ADR$151$156$172 $169$173
RevPAR$109$113$128$124$123

Montreal
Montreal experienced another strong year of GDP growth of 3.4 per cent in 2018, putting the city ahead of all Canadian metropolitan cities in terms of GDP growth. GDP growth for 2019 is expected to cool to two per cent as major infrastructure projects are expected to finish, wage growth is expected to be minimal and household spending is slowing.

A record number of cruise-ship arrivals were realized in 2018 at Old Port and total overnight visits for the city grew by 1.9 per cent. Montreal is hosting the World Summit AI in the fall of 2019, which is expected to contribute to an increase in overnight visits (a projected increase of 2.3 per cent).

In 2018, supply growth in Greater Montreal was a healthy five per cent, largely driven by new rooms in the downtown market. Only one-per-cent growth in demand was realized and market occupancy dropped two points to 73 per cent for the year. In 2019, demand growth is projected to only marginally outpace supply growth, resulting in market occupancy increasing by one point to 74 per cent.

Since 2013, Montreal has achieved strong growth in ADR each year — increasing from $136 in 2012 to finish 2018 at $179. This pace of growth is expected to continue into 2019 with a projected $6 lift in rate. Consequently, RevPAR is projected to improve four per cent (or $6).

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy71%73%75%73%74%
ADR$154$163$175 $179$185
RevPAR$109$118$131$130$136

Quebec City
GDP for Quebec City grew 1.9 per cent in 2018 and the same pace of growth is expected for 2019. Despite a cooling in employment growth in 2019 — following the dramatic increase of 9,800 jobs in 2018 — business investment is expected to be up, which will lead to growth in the goods-producing and services-producing industries. The unemployment rate is projected to remain at a very low 3.8 per cent (only Victoria fared better). Some major construction projects include the ongoing new hospital complex and a $550-million commercial and residential development in Lévis. As well, the $755-million Phare de Quebec mixed-use development is expected to start in 2019.

Overnight visits to Quebec City increased by 2.7 per cent in 2018, with a record-breaking number of cruis- ship visits to the Port of Quebec and the G7 Summit, which was held in Charlevoix. Quebec City is becoming a popular destination for American visitors from the New England states, who can travel via car. U.S. overnight visits grew by 3.6 per cent in 2018 and are expected to grow by 2.5 per cent in 2019.

Demand in Quebec City increased by two per cent in 2018, while supply grew by less than one per cent, pushing occupancy up one point to 69 per cent in 2018. Market ADR growth was strong at five per cent, increasing rate to $177 last year. As a result, RevPAR in the market increased by seven per cent.

Market occupancy is projected to be 69 per cent in 2019 due to balanced supply and demand growth. RevPAR for the market is projected to grow two per cent to $124, driven by projected growth in ADR.

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy63%66%68%69%69%
ADR$158$164$168$177$180
RevPAR$100$109$114$122$124

Halifax/Dartmouth
GDP growth is expected to be two per cent this year following a lower than expected 1.4-per-cent increase in 2018. This growth is mainly attributed to the manufacturing and construction sectors due to major shipbuilding projects and non-residential projects.
Overnight visits to Halifax increased by 1.3 per cent in 2018, which was boosted by the new Nova Centre downtown. Growth for overnight visits is expected to be 1.7 per cent for 2019 with some major events taking place, such as the CHL Memorial Cup.

In 2018, the Halifax/Dartmouth accommodation market experienced a strong level of supply growth with an increase of five per cent. Demand growth was three per cent in 2018, bringing market occupancy down two points to finish at 70 per cent. Rate in 2018 grew six per cent, contributing to an overall increase of four per cent in RevPAR.

Despite a projection for positive demand growth, new supply has impacted the market with the re-opening of the DoubleTree by Hilton St. John’s Harbourview, along with other new rooms. As a result, the market will hold occupancy at 70 per cent this year. With a slight decrease in projected ADR growth of less than one per cent, RevPAR is projected to contract by approximately one per cent to $109 in 2019.

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy64%68%72%70%70%
ADR$133$166$149$158$157
RevPAR$85$93$107$111$109

St. John’s
As a result of major sectors declining in 2018, GDP grew a modest 0.7 per cent in 2018. A substantial increase in offshore oil production is expected to lead to a bounce back in GDP growth of 2.1 per cent in 2019.

In 2018, hotel supply in St. John’s grew a staggering 18 per cent with the introduction of two new hotels and other new rooms in the market. Disappointingly, demand contracted, rates fell and the market experienced a 20-per-cent drop in RevPAR.

Supply growth in 2019 is expected to be a more moderate six per cent and demand is projected to rebound, growing nine per cent. However, the new supply is impacting the market in terms of competitiveness and operators are dropping rate as a result. Market ADR is projected to decline eight per cent (or $12) in 2019. Despite a projected one-point improvement in occupancy, RevPAR is expected to decline five per cent.

2015
ACTUAL
2016
ACTUAL
2017
ACTUAL
2018
ACTUAL
2019
CBRE(F)
Occupancy65%61%63%53%54%
ADR$154$151$149$142$129
RevPAR$101$93$93$74$69

Written by CBRE HOTELS VAS

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