September 2022 Digital Issue

If 2021 was widely
considered to be a
lost year, with only
a minimal recovery
from the impacts
of COVID, then
2022 should be
deemed the year, of
the bounce back.
In 2021, national
Revenue Per
Available Room
(RevPAR) growth
was 47 per cent,
increasing to $57,
which on a relative basis was only 54
per cent of 2019 RevPAR. Occupancy
finished at 42 per cent, with about $7
of Average Daily Rate (ADR) growth
over 2020. Aside from the summer
and early fall, which saw strong leisure
demand, the balance of the year was
only moderately better than the last
two quarters of 2020.
Heading into 2020, the
accommodation industry in Canada
was operating at peak performance
levels, running 65 per cent occupancy
with an ADR of $163 and a RevPAR of
$106. Similarly, operating profits were
at peak levels in the range of $$15,000
PAR. The industry’s growth over the
2015 to 2019 period was fuelled by
moderate supply growth, strong demand
growth and national ADR growth of
four per cent on a compounded annual
basis. There was strong domestic
and international visitation taking
place and Canada’s reputation as a
destination for both corporate and
Indicator
leisure travel was growing. According
to Destination Canada, at the end of
2019, tourism spending in Canada was
$105.1 billion, of which $82 billion was
generated by domestic spending.
With the impacts of COVID in
2020, the industry saw the singlebiggest
year of declines, with RevPAR
nationally falling by 64 per cent to
just $39. Occupancy was 30 per cent,
with the almost complete shutdown
of travel from all demand segments.
Rate declined by 21 per cent to $128,
effectively wiping out all rate growth
the industry had realized since 2013.
CBRE’s Annual Trends 2021 report
indicates that, in general, operating
profits fell to $800 PAR.
Heading into this year, the
expectation was that 2022 would see
incremental recovery of occupancy
and ADR and, ultimately, RevPAR.
The recovery of occupancy was
expected to come from more diversified
segmentation, more traditional
seasonality patterns and ADR
growth from rate yield generated by
segmentation and seasonal pricing
pressures. The expectation was that
through the year there would be a steady,
month over month improvement in the
top-line metrics and that the gap to 2019
RevPAR would narrow. After a bit of a
slow start in January and February with
the Omicron wave, RevPAR recovery
month to month has accelerated sharply
and beginning in June has hit 100 per
cent of 2019 levels.
CBRE's current forecast is for 2022
to be a year of unparalleled recovery,
with a sharp V-shaped curve becoming
apparent. The industry is projected
to see RevPAR growth of 70 per cent
in 2022. This growth will result in a
RevPAR of $97, rebounding to 91 per
cent of 2019 levels.
Previously, when the industry has
recovered from a demand shock-driven
downturn, the recovery has been led
by a relatively rapid return of demand
levels (typically one to two years)
with ADR recovery taking several
more years to return to the prior peak
(typically three to four years) with
total RevPAR rebound taking between
four and six years.
However, based on the current
market dynamics, it appears the
industry’s recovery from COVID
will be anything but typical — in
fact, this time around everything is
turned upside-down. At the end of
2022, ‘forecast that demand growth
will be 40 per cent, increasing
occupancy nationally to 59 per cent.
While occupied room nights will be
approximately 91 per cent of 2019
levels, this will leave more than 9.3
million occupied room nights still to
be recovered.
The biggest surprise to the recovery
in 2022 has been the strength of
ADR, which is forecast to be up by 22
per cent, finishing the year at $165,
approximately 101 per cent of 2019
levels. In general, ADR in tertiary
and resort markets has been at or
above 2019 levels since the start of
the year, while downtown, airport
and secondary markets have only
Year-Over-Year Change
Occupancy ADR RevPAR Supply Demand OCC ADR RevPAR
Historic
2019 65% $163 $106 1.4% 1% -1 pt 5% 5%
2022 30% $128 $39 0.7% -54% -35 pts -21% -64%
2021 42% $135 $57 0.5% 40% 12 pts 6% 47%
Forecast
2022 59% $165 $97 0.6% $40% 17pts 22% 70%
$31
$46
$55
$70
Confidential & Proprietary | © 2022 CBRE, Inc. 1
Source CBRE Hotels
RevPAR
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
56%
$75
$42
70%
$88
$62
87%
$89
$78
93%
$95
$88
seen rates-exceed 2019 levels since
about May. However, pricing in these
markets through the peak summer
season will more than offset any lag
from the early part of the year.
Operators have been able to
drive significantly higher-thanexpected
ADR levels for myriad
reasons, including general economic
inflationary conditions, very high levels
of leisure demand due to pent-up travel
desire and excess discretionary income,
as well as both direct and indirect
capacity constraints due to labour
shortages in the hospitality, tourism
and related industries. While these
conditions have been favourable, it is
unlikely that this level of ADR growth
can continue over the longer term.
CAPACITY CONSTRAINTS:
A SHORT-TERM ISSUE OR
HERE TO STAY?
As discussed, national occupancy is
expected to rebound in 2022 to 59 per
cent, which is about six points behind
the 2019 occupancy. Since early spring,
89%
$112
$100
$84
105%
$139
$132
$104
$144
$137
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Canada
$152
$142
$131
$107
there has been considerable discussion
about labour-market conditions
and impact it’s having, and could
continue to have, on the industry’s
recovery. According to Statistics
Canada, as of July 2021 there were
more than 300,000 job vacancies in
the Accommodation and foodservice
sector, while the overall unemployment
rate in Canada remains at a recordlow
4.9 per cent. Many operators have
indicated they’re having to restrict
capacity (i.e. available rooms) in order
to ensure their ability to service guests
and turn over rooms on departure.
At this point, it’s not possible to
quantify the exact extent to which this
restricting of capacity could be limiting
the ability to capture additional
occupied room nights, as this is being
done at the property level in most
cases on a week-to-week basis. To this
point, the restricted capacity has been
mostly favourable as it has allowed
operators to drive rate yield on the
demand they are able to accommodate.
However, as other demand segments
$107
$86
2022 F 2022 A 2019 Recovery A
$91
$80
$75
$70
$106
$97
120%
110%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Recovery to 2019 Levels %
with negotiated or contracted rates this
dynamic will likely shift.
While some relief is expected
to come from Canada’s increased
immigration targets and the recent
changes to the foreign-workers
program, there are several other
industries where there are high levels of
job vacancies, which will compete for
new workers with the accommodation
sector. As such, it’s unlikely the labour
challenges will subside quickly, and this
may be an issue that persists for the
next several years. It will be necessary
to evaluate the impact of restricted
capacity on the industry’s ability to
ramp-up occupied room night demand
back to 2019 levels.
RECOVERY TO 2019 LEVELS: IS
IT THE RIGHT BENCHMARK?
Historically, when judging or
benchmarking the industry’s recovery
from a downturn, it’s been with a
view to getting back to the prior peak.
After surviving the initial months of
COVID, the discussion turned to what
18 | SEPTEMBER 2022
hoteliermagazine.com hoteliermagazine.com
SEPTEMBER 2022 | 19