WCLC: A tale of 10 cities

VANCOUVER, November 22, 2017 /CLN/— From the lofty pinnacles of RevPAR in Vancouver and Banff, to the uncertainties in Saskatchewan cities, the hotel markets of Western Canada showed marked differences in 2017.

Carrie Russell of HVS and Scott Duff of CBRE took an in-depth look at 11 markets in 10 Western Canadian cities at the Western Canadian Lodging Conference, produced by Big Picture Conferences, at the Fairmont Waterfront Hotel in Vancouver this past week.

Here's the hotel outlook in each market, with numbers from HVS/STR.

Winnipeg — The city saw exceptional economic growth in 2017 with an 8.0 per cent rise in RevPAR, with  a slowdown looming in 2018. A Hilton Garden Inn opened up this year, with a Residence Inn, a Hampton, a Hyatt Place and a Sutton Place all in the pipeline. By 2019, it will face the challenge of absorbing all this supply, Russell said. RevPAR for 2018 is expected to rise by 2.0 per cent, and drop by 0.4 per cent in 2019. The city has a brand new convention facility; now it needs the large, branded hotels to go with it. There were no major trades there in 2017. "Resiliency" is the word that best describes Manitoba, Duff said.

Saskatoon — The city's RevPAR dropped by 14.8 per cent during 2016, and is expected to drop by another 5.3 per cent this year.  Next year it should rise by 4.0 per cent. Then, by 2019, when it will have to accommodate a new Holiday Inn Express/Staybridge campus and the ALT at River Landing, RevPAR is predicted to drop by 2.9 per cent. "It's certainly a tough go there," said Duff, "but we're not seeing receiverships and powers of sale."

Regina — There's nowhere to go but up in Regina, as RevPAR declined by 5.8 per cent in 2016 and is expected to plummet another 9.7 per cent this year. Both 2018 and 2019 should show positive growth of about 4.0 per cent. "The market is the closest major city to Weyburn and Estevan.  As oil goes up, the market will increase," said Russell. 

Edmonton — Improvement in the resource sector should contribute to demand growth in 2018, following declines of 11.1 per cent in 2016 and an expected 5.5 per cent this year. The next two years should see RevPAR increases of 2.8 per cent for 2018 and 1.5 per cent for 2019. Russell noted that rate hasn't declined in Edmonton because of a lot of great new product on the market. They also have a fantastic new arena, which is attracting Alberta-bound concerts to Edmonton rather than Calgary. This city has the most significant new supply growth of any Western city, and is anticipating growth of 5.8 per cent in 2017, 2.2 per cent in 2018 and 3.6 per cent in 2019.

Calgary — Russell sees "green shoots," in the Calgary market, saying that their supply will soon be offset by demand growth.  "There are a lot of new rooms, but the downtown core is absorbing what they've got," she said. RevPAR appears to be trending upward after a steep decline of 15.1 per cent in 2016. This year, RevPAR will be up slightly, rising 0.7 per cent; a rise of 3.5 per cent is anticipated for 2018 and 5.9 per cent of 2019. Currently RevPAR is at $84. If the forecasts are correct, then Calgary RevPAR should reach $93 by 2019 — still $3 off the rate in 2009.

Banff — This is the place to be, Russell told the conference. There is no new supply in the forecast and increasing rates is the only way to go. “It’s a pretty closely held market, with points of entry quite limited,” said Duff. RevPAR grew by 12.9 per cent in 2015, and is forecast to come in at 12.4 per cent this year.  In 2018 and 2019, RevPAR is expected to grow more modestly — by 5.0 per cent in 2018 and 4.0 per cent in 2019.  The average daily rate, now at a robust $180, is expected to rise to $196 by 2019.

Thompson-Okanagan — This is a more modest market, without a lot of supply growth. Occupany has finally grown after several years of 60 per cent occupancy — it’s a ideal conditions to move RevPAR up, said Russell. Rates have had two strong years of growth, coming in at $81 this year and expected to go to $87 by 2019.  There was only one hotel trade this year.  Pomeroy Group bought the Best Western Kelowna Hotel & Suites from Salco Management Ltd. for $23,165 million or $132 per key, with a respectable cap rate of 8 per cent on adjusted NOI.

Vancouver Downtown — This hot market continued to be strong in 2017, with no signs of a correction. RevPAR grew by 11.5 per cent in 2016, 7.6 per cent this year and is projected to rise 6.0 per cent and 4.3 per cent in the next two years. “The 6.0 per cent is a little light, since 2018 looks like a good convention year,” said Russell.  ADR has grown from $105 in 2009 to $185 this year and a projected $205 in 2019. Most projects are mixed use because there is a challenge finding sites, and making the economics work.  Vancouver lost two hotels this year, the Coast Plaza at Stanley Park and the Landmark. 

The Rosewood Hotel Georgia in downtown Vancouver sold earlier this year for $145 million or an unprecedented $929,000 per key.  The seller was Delta Land and the buyer, Pacific Reach Properties.  The cap rate was 4.2 per cent.

Vancouver Airport — A modest increase in supply and probably modest rate growth will characterize this market, which saw 13.1 per cent RevPAR growth in 2016 and a projected $13.9 per cent this year. Next year, RevPAR is expected to grow by 8.6 per cent, and then slow to 2.7 per cent in 2019.  Average daily rate is currently $128, projected to rise to $142 by 2019.

Victoria — This is a strong international market, and going forward it has the most aggressive RevPAR increase projections in the West.  In 2016, RevPAR rose 11.6 per cent; in 2017 it increased 8.1 per cent; 2018 should see an 8.7 per cent rise and 2019 an additional 4.0 per cenet.  ADR, currently at $117 should go up to $132 by 2019. “Victoria is a prime destination for U.S. and Asian tourists,” Duff said.

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