New hotel supply, sales to reach 10-year high this year

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National hotel construction and sales volume is expected to exceed historical averages this year, according to a new forecast. 

In 2019, new supply is expected to increase by 2% – the highest annual rate of growth since the financial crisis of 2008. The increase in hotel starts has been buoyed by strong sales and attractive development land prices in suburban markets, CBRE reports. Investment volume is predicted to surpass last year’s $1.5 billion mark and likely eclipse the 10-year average of $1.8 billion.  

“Canadian hotel operating performance and investment metrics have never been stronger, and all indications point to investment volume matching, if not exceeding, historical averages in 2019,” said Bill Stone, executive vice-president of CBRE Hotels. “New supply is a good challenge to have as it reflects the strength of the market and Canada’s ability to compete on the world stage.”

Hotel occupancy reached a record-high of 66% nationally in 2018. Still, certain areas in Alberta are facing occupancy challenges as markets struggle to keep up with new supply. While the resort market in the province is thriving and Edmonton and Calgary show modest signs of growth, oil-patch towns continue to lag far behind the national growth average. Despite diverging trends across the province, Alberta’s overall hotel market is expected to see demand grow 1% in 2019. 

Revenue per available room (RevPAR) is expected to increase along with demand, particularly in smaller suburban cities where cost of available development land versus revenue is more balanced. Seventy-two per cent of hotel transactions took place in secondary and tertiary markets in 2018, compared with just 59% a year prior.

B.C. led RevPAR growth last year, increasing 10% year-over-year. RevPAR is expected to grow in all Western Canadian provinces and 4.7% across Central Canada. 

“Our hotels are full, and we are in good shape to continue to grow top and bottom lines in 2019,” said David Larone, senior managing director of CBRE Hotels. 

Western Investor