Canada’s hotel sector is coming back, but executives say it’s not near pre-pandemic levels
If you needed a refresher on the precarious nature of COVID-19 and the hospitality industry, it came early during the Canadian Hotel Investment Conference.
Carrie Russell, Senior Managing Partner of HVS, took over as moderator of the panel titled “The Raindrops Have Stopped Falling On My Head” and kicked off a discussion on the state of the industry after the moderator of origin was prevented from attending due to exposure to COVID -19.
Revenue per available room, or RevPAR, was up nearly 100% in the first quarter from a year ago and a safe bet for full industry recovery is now 2024.
“We’ve seen a strong recovery,” Russell said. “The market is doing well.”
She says the real test for the stats is how they compare to where the industry was in 2019 before the pandemic.
RevPAR in Canada hit 52% at the end of 2021, with British Columbia doing better at 56% due to national performance, Russell said.
The real variation is between major downtown markets, which only recovered between 30% and 35% of their RevPAR peaks, while regional markets like the Okanagan Valley and parts of the Ontario are between 80% and 85%.
Despite the lack of a full recovery, the sector still recorded nearly $2 billion in transactions in 2021, said Alam Pirani, executive general manager of hotels for Canada and the Caribbean at Colliers Hotels.
“The theme is that hotel investing is back,” Pirani said, adding that investing has moved away from risk mitigation and liquidity and more towards growth.
Alternative use generated around 80% of transactions, with approximately $325 million from government organizations turning to hotels for uses such as social housing. Distressed deals generated less than 2% of deals.
Pirani said 6,500 rooms, or 1.5% of the Canadian market, have been removed from inventory over the past two years. “It bodes well for the balance of supply and demand,” he said.
Curtis Gallagher, director and head of Canadian hospitality at Avison Young, said Ontario and the Greater Toronto Area are in high demand among investors.
“Try to find the asset and the price someone is willing to accept. That’s the biggest challenge,” Gallagher said. “The pivot point when trades start to settle is when you believe the rally is sticky and will take shape. What you’re selling are futures. If there’s no belief in the future or protections, there is no activity Everyone sits on their hands.
In recent weeks, Pirani said it has heard from owners that booking habits have increased for the second and third quarters.
“Now we don’t see large group transactions coming back, but smaller meetings and leisure activities. [are rising] and individuals are returning to city centers,” Pirani said.
Anthony Cohen, executive vice president and partner of Crescent Hotels & Resorts Canada and president and CEO of Global Edge Investments, said that every time a restriction is lifted, there is an increase in hotel activity in reservations.
Recently, “we’ve seen a huge increase in our city properties in markets like Toronto,” said Cohen, who said he thinks the next two months will be telling as government assistance winds down. “It’s terrible, but it also means that your economic performance is improving. I think from a transactions perspective, the next two quarters will be telling.”