Pannell Kerr Forster’s 2002/2003 Outlook - Major Urban Markets in Canada

The events of September 11^th had a significant impact on the performance of the Canadian Accommodation industry in 2001.  It is expected that much of the demand lost as a result of these events, will be recovered in 2002.  The recovery in demand levels will be enhanced by modest economic growth.  However, with further increases in supply in 2002, there will be only modest improvement in occupancy and average rates 

At a national level our forecasts for 2002 reflect a recovery of the demand lost in the last four months of 2001, with demand levels up 3% over actual 2001 levels. With a further 1.5% increase in supply in 2002, occupancy will improve to 63%, but will still be below last year's pre-September 11th performance. Average daily rates are forecast to increase by 2.5% in 2002 over actual 2001 levels, but will be up only 1% relative to pre-September 11th forecasts at the end of August. With supply and demand growth in balance in 2003, national occupancy will remain in the range of 63%, while average daily rates are forecast to increase by about 2.5%.

The ten major markets examined individually are also forecast to realize a supply demand balance for 2002 to maintain occupancy of 65% in 2002. Supply is forecast to outpace demand in 2003 for a slight drop in occupancy to 64% in 2003. Average daily rates are forecast to increase to $122 in 2002 and $125 in 2003.

The balance of Canadian markets are also expected to maintain a flat occupancy relative to 2001 at 61%. With moderate supply increases in 2003 occupancy is forecast to improve to 62%. Rate growth of 2.5% has been projected in each of the next two years for an average daily rate of $113 in 2002 and $116 in 2003.

Our projections for individual markets reflect our general view of demand recovery, but are also reflective of the specific supply and demand factors impacting each market