After a year of occupancy gains and buoyant earnings, the hotel sector is projected to experience more modest, but continued growth in 2024. Nationally, CoStar analytics reports an 18 per cent year-over-year jump in revenue per available room (RevPAR) over the course of 2023, while the average daily rate (ADR) for the fourth quarter was 6.2 per cent higher than in Q4 2022. With leisure travel as the driving force, the national occupancy rate climbed back to pre-pandemic levels.
However, business travel continues to lag, particularly demonstrated in lower weekday occupancies in Toronto, Montreal and Vancouver. Newly released analysis and projections from Marcus & Millichap attributes this to a combination of “the adoption of remote meetings, ESG compliance and businesses’ cost-cutting efforts”.
On the investment side, total sales value nudged up slightly over 2022, but with a significant uptick in the average price per room. Colliers Hotels reports a 2 per cent year-over-year increase in total sales volume, reaching $1.65 billion last year, while the average price per room soared by 31 per cent, to $178,300.
Looking to the coming year, new supply will be up modestly from 2023, but well behind the pre-pandemic pace. As well, it’s anticipated some existing space will be converted to other residential uses and proposed new regulations on short-term rental accommodations could have positive influence on hotel demand. International travel to Canada is also expected to increase, particularly from the United States.
“Despite a likely contraction in the broader economy, RevPAR continued its record-breaking streak in Q4 2023, achieving the highest level ever achieved in any Q4 on record,” observes Laura Baxter, director of hospitality analytics with CoStar. “In 2024, topline growth will be more muted. With costs throughout the P&L (profit and loss) still rising, hoteliers will be laser-focused on managing margins to preserve profits.”
Marcus & Millichap analysts foresee another year of rate growth, albeit at a slower pace than in 2023. Of the seven major markets analyzed, Montreal is alone in registering expectations for lower occupancy, while Vancouver is projected to hit a record-high, exceeding 80 per cent.
Nationwide increases in ADR and RevPAR are also expected. They’ll be most muted in Toronto, with just a 0.3 per cent rise in ADR and 1.5 per cent increase in RevPAR projected. Meanwhile, Edmonton is picked as the top performer on all fronts with a 400 basis point gain in occupancy, a 6.5 per cent increase in ADR and a 14 per cent jump in RevPAR.
