Vancouver is Canada's top hotel market, but tariffs bring uncertainty | Daily Hive

Pan Pacific Vancouver Hotel and Fairmont Waterfront Hotel in downtown Vancouver. (Alena Charykova/Shutterstock)

Vancouver remains the hottest hotel market among Canada’s major urban regions, continuing a trend that has solidified in recent years following the pandemic.

This dominance is reflected in Vancouver’s strong lead across key metrics, including average daily rates, revenue per available room, and overall occupancy rate, according to commercial real estate firm Avison Young’s new report on 2024 Canadian hotel performance.

In 2024, Vancouver’s room occupancy rate reached 78.2 per cent, marking a slight decrease of 0.4 per cent. In comparison, Toronto recorded 75.3 per cent, Montreal 69.9 per cent, Ottawa-Gatineau 69 per cent, Calgary 65.6 per cent, and Edmonton 58.6 per cent.

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Vancouver’s average daily room rate reached $285 in 2024, marking a staggering 7.7 per cent increase from 2023 — the highest real rate and annual increase in the country. The average revenue per available room stood at $223, the highest actual revenue but the second-highest annual increase.

Toronto’s average daily rate was $254.63 (revenue per available room at $192), Montreal’s was $231 ($161.32), Ottawa-Gatineau’s was $198 ($137), Calgary’s was $175 ($115), and Edmonton’s was $147 ($86).

According to Avison Young, a clear trend in the tourism market shows a flight to quality, with higher-tier hotels outperforming lower-tier properties. Luxury hotels, in particular, recorded the highest year-over-year revenue per available room growth.

Among these six major hotel markets, 2024 saw nearly $1.3 billion in hotel property sales, a 46 per cent increase from 2023 and an 88 per cent surge from 2019. This was the highest hotel transaction volume since 2017, surpassing the 10-year average of $1 billion.

One notable 2024 transaction was the sale of 10 storeys of former office space in the newly completed 48-storey Highline Metrotown mixed-use residential tower at 6505 Sussex Avenue in Burnaby. The office floors, never leased, will now become a 159-room hotel next to SkyTrain’s Metrotown Station. Avison Young reported the property was sold for $47.2 million.

The firm anticipates continued growth in hotel transactions and investments in the coming years.

Americans account for 23% of Vancouver’s visitors and 28% of visitor spending

Vancouver’s strong hotel market position is partly driven by robust tourism. Destination Vancouver reported that Metro Vancouver saw 11.2 million overnight visitors in 2024, a three per cent year-over-year increase. The region also saw a record 1.3 million cruise ship passengers at Canada Place and the second-highest-ever aviation total of 26.2 million passengers at Vancouver International Airport. Additionally, 2024 was a major year for events, including the CFL Grey Cup and Taylor Swift’s The Eras Tour finale.

Despite Vancouver’s success, challenges loom. Speaking at a Greater Vancouver Board of Trade event on Tuesday, Destination Vancouver President and CEO Royce Chwin warned of turbulent conditions ahead, at least in the short term.

The Canada-U.S. trade war, fueled by U.S. President Donald Trump’s tariffs, could impact one of the region’s largest tourism markets — American visitors. In 2024, U.S. travelers accounted for 23 per cent of Metro Vancouver’s visitors and 28 per cent of total visitor spending.

Concerns are growing that the hostile political environment and Canada’s retaliatory tariffs on American goods, including taxes U.S. visitors pay upon returning home with Canadian goods, may deter American tourists. Chwin revealed that five business conferences organized by U.S. entities have already canceled their Vancouver plans.

“Those conferences, those organizers, have worried about facing a backlash from bringing their business to Canada. What you’re starting to see is a slow weaponization of travel, which is incredibly unfortunate,” said Chwin.

With all that said, some of these impacts could be offset by the allure of the low Canadian dollar.

Growing hotel room shortage

Beyond geopolitical risks, Vancouver also faces a hotel capacity crisis. The city has roughly 13,000 hotel rooms — the same number as in 2003. Across Metro Vancouver, there are about 25,000 hotel rooms. Chwin noted that Vancouver, where the demand is greatest, is about 15 years behind in hotel development.

Chwin reiterated the findings of Destination Vancouver’s March 2023 report on hotel capacity, which found that Metro Vancouver is in need of 20,000 additional hotel rooms, including 10,000 more rooms within the city of Vancouver and another 10,000 elsewhere in the region. These figures were created before the provincial government’s new short-term rental regulations, curbing Airbnb and Vrbo listings, and effectively increasing hotel demand even further.

A shortage of rooms combined with high demand is driving up hotel rates, potentially deterring budget travellers and increasingly impacting Vancouver’s competitive ability to attract conferences and events.

Since the 2023 report, 20 hotel projects have entered various stages of development, representing 3,894 new rooms. However, high project costs — particularly due to elevated land prices, and more recently the inflation of construction costs — pose a challenge. A possible solution is allowing greater hotel use density and mixed-use residential and hotel projects, where strata condominium ownership homes or secured purpose-built market rental homes subsidize hotel development costs. Additionally, beyond capital costs, rising hotel operating costs remain a concern.

Chwin noted that the Hotel Development Task Force, comprised of Destination Vancouver and other tourism industry stakeholders, is working on policy recommendations that will be sent to Vancouver City Council shortly.

“Our competitors like Chicago, Seattle, L.A., San Diego, Houston, and so on, are building hotels. And if we don’t do something, it’s not if, it’s when our competitiveness will be impacted,” said Chwin.

While borrowing costs are declining due to the Bank of Canada’s policy interest rate cuts, the uncertainty surrounding the trade war may prompt financial institutions and other lenders to pause construction financing for some hotel projects, even if they clear municipal approvals.

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