Alberta hotel market growing despite economic challenges

Supply and demand growth in Alberta in 2019 are projected at 0.7 per cent and one per cent respectively for Edmonton and Calgary.

Mario ToneguzziAlberta’s hotel market continues to experience challenges in the wake of the province’s economic downturn, but Edmonton and Calgary are beginning to develop green shoots, according to a new report released Tuesday by commercial real estate firm CBRE.

The report said supply and demand growth in Alberta in 2019 are projected at 0.7 per cent and one per cent respectively for Edmonton and Calgary.

Nationally, CBRE is forecasting that new supply of hotel product will increase by two per cent in 2019, marking the highest single year of supply growth in the Canadian hotel market since the financial crisis of 2008.

“This will be driven by owners who are flush with capital pursuing new-build development opportunities in the suburbs of Canada’s largest cities, where land acquisition and development costs remain reasonable,” it said.

“And with several hotels and portfolios currently for sale, CBRE further predicts that 2019 hotel investment volume will exceed last year’s total of $1.5 billion, and surpass the 10-year average of $1.8 billion. Domestic and foreign investors — seeking a safe haven amid global economic uncertainty — continue to show strong interest in acquiring hotels in Canada.

With strong tourism and business travel, CBRE said it expects that RevPAR, the hotel industry’s key metric of revenue per available room, will rise four per cent in 2019.

“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, CBRE Hotels, in a news release.

“The only factors that cause significant shifts in the hotel market are either geopolitical events — such as 9/11 and the global financial crisis — or the delivery of new hotel supply, which is what we are predicting we will see this year. 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.”

The report said hotel supply will be increasingly constrained in the country’s major markets due to a lack of availability and affordability in the urban core, development costs rising faster than RevPAR growth in many markets, and further widening of spreads in the debt markets.

“The hotel industry in Canada is performing at all-time highs, with record occupancy, average daily rates and RevPAR, as well as bottom-line performance,” added David Larone, Senior Managing Director, CBRE Hotels. “Our hotels are full, and we are in good shape to continue to grow top and bottom lines in 2019.”

alberta hotel market

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