Vancouver now has the highest hotel room rates amongst Canada's major cities

Mar 7 2023, 11:52 pm

A strong rebound in tourism and overnight visitors accompanied by a contracted hotel supply has sent Vancouver’s hotel room rates soaring.

In fact, Vancouver’s hotel market now has the highest average daily rate amongst Canada’s six largest major urban hotel markets, with an average daily rate of $234.12 for 2022, according to data newly compiled by commercial real estate firm Avison Young.

This average room rate is a staggering 44.3% increase compared to a year ago, and the rate of increase is only second to Toronto’s 53.8% year-over-year increase to an average daily rate of $219.80.

The Canadian hotel industry recovered with “vigour” in 2022, surpassing pre-pandemic levels in both the average daily rate and revenue per available room.

Over the course of 2022, Vancouver’s hotel market reached a room occupancy rate of 72.9%, which is also the highest amongst major Canadian urban hotel markets. This represents a 50.4% year-over-year growth in the utility of hotel room supply.

The increase in average daily rate was driven by leisure travel and small local group demand, while corporate and international travel both “remained in the early stages of recovery.”

Revenue generated per available room in Vancouver increased by 117% year-over-year to $170.61, which is over $21 higher than Toronto, and nearly double Calgary.

These statistics on Vancouver’s hotel market performance coincide with Destination Vancouver’s warning that Metro Vancouver as a whole, especially the city of Vancouver, where demand is greatest, is facing an immense hotel room supply shortfall over the short- and long-term.

The tourism bureau released a report Monday outlining that Metro Vancouver needs 20,000 additional hotel rooms between now and 2050, including 10,000 within Vancouver.

If the supply of hotel rooms remains at current levels, real demand will exceed supply in the summer months in the City of Vancouver starting in 2026, the summer months in the rest of Metro Vancouver by 2028, and every month of the year across Metro Vancouver by 2040.

The region, mainly within Vancouver, shed about 2,000 rooms since 2010, initially from residential redevelopments and conversions before the pandemic, and the acquisition of older, lower-tier hotels by governments for supportive housing for the homeless early on in the pandemic.

Currently, based on publicly posted development applications and building permits, the region is expected to see 3,452 new additional hotel rooms from new building developments, including 670 within downtown Vancouver and 1,045 in other areas of the city. This is insufficient to meet demand over the medium term.

Without an adequate increase in hotel room supply, Vancouver’s hotel rooms will continue to see escalating prices, visitors will choose to travel to other Canadian destinations outside of British Columbia, and the city and region will become less competitive with landing the rights to host tourism-generating conferences, conventions, and sports events. There would be opportunity costs of economic losses in the tens of billions of dollars and major job growth impacts.

“The lack of available assets to purchase will encourage more development activity. Regardless of relatively high construction costs and lingering supply-chain challenges, significant revenue growth prospects in several markets will result in more positive hotel feasibility outcomes,” states Avison Young.

Furthermore, hotel prices within the jurisdiction of the City of Vancouver went up earlier this year through taxation, when a new 2.5% Major Events Municipal and Regional District Tax went into effect to help pay for costs related to hosting the 2026 FIFA World Cup in Vancouver. This additional hotel tax of $2.50 per $100 spent — not applicable to hotels outside of Vancouver’s municipal jurisdiction — will remain until 2030.

Canadian major market hotel performance: 2022 year-end

  • Vancouver
    • Room occupancy rate: 72.9% (+50.4% year-over-year)
    • Average daily room rate: $243.12 (+44.3% year-over-year)
    • Revenue per available room: $170.61 (+117.1% year-over-year)
  • Calgary
    • Room occupancy rate: 58.5% (+69.8% year-over-year)
    • Average daily room rate: $152.15 (+29.0% year-over-year)
    • Revenue per available room: $88.97 (+119.0% year-over-year)
  • Edmonton¬†
    • Room occupancy rate: 51.8% (+46.8% year-over-year)
    • Average daily room rate: $128.10 (+21.0% year-over-year)
    • Revenue per available room: $66.35 (+77.6% year-over-year)
  • Toronto¬†
    • Room occupancy rate: 67.9% (+62.7% year-over-year)
    • Average daily room rate: $219.80 (+53.8% year-over-year)
    • Revenue per available room: $149.14 (+150.1% year-over-year)
  • Ottawa
    • Room occupancy rate: 61.2% (+52.5% year-over-year)
    • Average daily room rate: $178.22 (+32.2% year-over-year)
    • Revenue per available room: $108.99 (+101.6% year-over-year)
  • Montreal
    • Room occupancy rate: 62.1% (+88.6% year-over-year)
    • Average daily room rate: $178.22 (+32.2% year-over-year)
    • Revenue per available room: $127.45 (+154.8% year-over-year)
Kenneth ChanKenneth Chan

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