A report by CBRE says COVID-19 “has impacted the Canadian accommodation industry more suddenly and severely than any other commercial real estate sector.” Occupancy dropped from historic highs to less than 20 per cent “virtually overnight”, the company says.
The number of visitors and the rate they pay per room declined significantly and CBRE Hotels is now forecasting that revenue per available room (RevPAR) will be down by 50 per cent in 2020. Looking ahead to 2021, RevPAR is expected to be 20 per cent below 2019 levels. Only after 36 months is the hotel sector forecast to return to pre-COVID-19 performance, the company says.
“The easing of travel restrictions and social distancing guidelines is the first step to recovery in the hotel sector, but consumer confidence is critical and may take a long time, plus a vaccine, to revive,” says Brian Stanford, senior managing director, CBRE Hotels. “And there could be further downside for the hotel sector to come.”
Here is some of what CBRE Hotels is forecasting for the Canadian hotel sector in the months ahead:
- It’s likely that full service hotels and resorts will experience a more protracted recovery in demand, given the importance of meeting/conference business. Limited service hotels, particularly those that have remained open, may see demand return more quickly.
- Recovery will necessitate innovation at hotels to address social distancing protocols, enhanced sanitation measures and revised operating procedures.
- Lenders are continually assessing their hotel loan books, focusing on key relationships and hotels with a solid business strategy. Hotels that had weak operations going into this pandemic will be highly scrutinized and without new capital, some will inevitably be forced to recapitalize or sell.
- Single asset owners and developers – particularly in Alberta, Southern Saskatchewan and Northern B.C. – who do not have established lender relationships, deep capital reserves, or the nimbleness to adapt to consumer expectations, will face big challenges.