Toronto's Fairmont Royal York Hotel. In Toronto, the average daily room rate is expected to hit $154, $6 more than last year.STEVE PAYNE/The New York Times
Hotels across the country are experiencing record-high occupancy rates and increased demand, leading to steeper room prices in many Canadian cities.
Hotels in the downtown areas of Vancouver and Toronto are the most expensive spots to stay in, and hoteliers are seeing the biggest jump in revenue per room this year, says Brian Stanford, senior managing director at CBRE, a consultant that monitors the hotel industry.
It's not just a tourism boom in the country, propelled significantly by the faltering loonie, that has contributed to rising hotel costs.
"The low loonie has certainly helped and has increased U.S. visitation and international travel, as those numbers are growing very strongly," said Mr. Stanford.
"But at the end of the day, it's really been the resurgence in corporate demand in those markets."
According to CBRE, occupancy rates are on pace to increase in Vancouver to 78 per cent this year, up from 76 per cent last year, and in Toronto to 73 per cent from 71 last year.
Hotels in Vancouver will also make 10-per-cent more revenue per room this year, with an average daily room rate of $175, $12 more than 2015.
In Toronto, the average daily room rate is expected to hit $154, $6 more than last year, with hotels making eight-per-cent more revenue per room.
However, not all areas of the country are reaping the benefits of a tourism boom, low loonie and increased corporate demand.
Cities in resource-based provinces such as Alberta, Newfoundland and Saskatchewan are seeing dwindling hotel demand, thanks largely to plunging oil prices and the resulting economic recession. Mr. Stanford said 2015 was a particularly tough year for the hotel industry in those provinces, with the exception of tourist destinations such as Banff.
The results are further exacerbated by the fact that during the oil boom, cities like Calgary and Edmonton increased supply by building several new hotels that have recently opened for business.
According to Mr. Stanford, supply increased in Calgary by more than 10 per cent, and in Edmonton by 8 per cent.
Meanwhile, demand has plummeted, so revenues in Calgary and Edmonton as of May were down 24 per cent and 10 per cent, respectively, from the same time last year.
"They were having good times for so many years, everyone decided to build," said Monique Rosszell, the managing director of consulting at HVS.
"But now they have a decrease in demand and a lot more rooms in the market, which always puts downward pressure because there are more rooms available."
A search for hotels on Expedia.ca shows the stark difference between markets across the country. For Saturday, Aug. 20, the average cost of a hotel room on Expedia.ca in downtown Toronto was $265 (with hotels being 65-per-cent booked just over three weeks in advance). The average cost of a room in downtown Vancouver on the same night came in at $492 (70-per-cent booked). Ms. Rosszell says in Toronto it's the luxury hotels that have led the way in raising hotel prices.
"Five-star hotels are ramping up and pushing rates. They've created a whole new tier of quality hotels, which means the four-star hotels – the Hiltons, the Marriots, the Westins – are able to push their rates up as they are no longer the market leaders," said Ms. Rosszell.
Meanwhile in Alberta, the average cost of a room on Expedia.ca in downtown Calgary is $120 (55 per cent booked) and in Edmonton $116 (40 per cent booked).
However, Alberta's destination towns are thriving, thanks largely in part to the low loonie. In Banff, the average cost of a hotel room for that evening was $385 (90-per-cent booked).
Jessica Conant, vice-president of revenue management for Marriott Hotels Canada, says she first saw demand grow in February, when Toronto played host to the NBA all-star game. Since then, demand growth has been consistent. Although oil-producing provinces have been performing poorly, Ms. Conant says other markets are so strong that they are driving industry performance.
Ms. Conant says Marriott Hotels has launched marketing campaigns selling Canada as an ideal travel destination to the company's reward program clients.
"I can think of five people from the U.S. who told me in the past week they are going to Canada for a vacation," Ms. Conant said. "Lots of people are finding it an attractive option, and it's a great value."