In preparation for the 2006-2007 Canadian Accommodation Outlook Forums, held in Toronto and Vancouver in October, PKF Consulting went to the industry to determine their views on top line and bottom line growth prospects for 2007.
On a national basis, almost 50% of industry participants believe that RevPAR growth will be somewhere between 2% and 5% in 2007. At the same time, about one quarter of the respondents expect RevPAR will be under 2%. Another 20% believe it will grow between 5 and 10% and 6% expect growth of over 5%. PKF Consulting is forecasting RevPAR growth of 6.6% for 2006 and 4.8% for 2007. Consequently, the industry Outlook for 2007, is generally on par with our projections. The PKF Consulting forecast for year-end 2006 is a 65% occupancy at an ADR of $123, with RevPAR at $80. Our 2007 Outlook is for a 66% occupancy at an ADR of $127, with RevPAR at $84.
From the Industry's Perspective
2007 Market Outlook
Based on strong year to date performance, PKF is forecasting RevPAR growth of 11.0% in Western Canada for 2006. Our projection for 2007 is 4.8%. Despite strong 2006 performance, 40% of industry participants concur with PKF that RevPAR growth will be between 2 and 5% in 2007. However, overall industry optimism remains strongest in Western Canada with 36% of respondents expecting top line growth of more than 5%.
Central Canada is forecasted to achieve a 6.5% RevPAR growth in 2006 and 4.7% in 2007. 69% of industry participants concur with PKF that RevPAR growth will be between 2 and 5% in 2007, however only 6% of respondents are expecting top line growth of more than 5% in Central Canada.
In Atlantic Canada, we are forecasting 2.8% RevPAR growth for 2006 and 4.4% in 2007. While 43% of the industry concur with PKF that RevPAR growth will be between 2 and 5% in 2007, 14% expect growth under 2% and a further 14% are actually expecting a decline.
With regards to the national bottom line, PKF’s Outlook is for a 13.1% increase in profitability this year and a 5.8% increase in 2007. Forty percent of the industry operators and owners are expecting profitability to increase between 2 and 5%, while 32% are expecting bottom line growth of over 5%, including 8% which are expecting growth in excess of 10%. 2006 profitability should be in the range of $10,600 per room, increasing to $11,200 in 2007.
From the Industry's Perspective
2007 Bottom Line Outlook
PKF’s Outlook for bottom line growth in Western Canada, is a13.1% increase this year and a 5.5% increase in profitability in 2007. While this percentage growth is lower than Central Canada, it is off a higher base, with the increase in actual profit in dollars per room for 2007 in both regions comparable. The industry’s view for bottom line growth in Western Canada is strong, with 33% of participants expecting growth of over 5%. This kind of growth will bring bottom line profitability to $12,326 per room in 2006 and $13,004 per room in 2007. Western Canada will finish 2006, 16% ahead of the national average and 24% ahead of Central Canada.
As identified on a percentage growth basis, PKF’s outlook for Central Canada in 2007 is slightly more optimistic than that for Western Canada at a 6.1% growth after a 10.5% increase in 2006. On an actual dollars basis the two regions are comparable. The industry’s view for bottom line growth in Central Canada is also strong, with 31% of participants expecting growth of over 5%. PKF is forecasting bottom line profitability in Central Canada of $9,905 per room in 2006 and $10,506 per room in 2007, which is still 20% behind 2000 levels.
In Atlantic Canada, the industry’s outlook is weaker, with 29% expecting a decline in profits and with none of the respondents expecting growth of more than 10% in net income. PKF’s Outlook is for a 1.7% increase in 2006 and a 3.2% increase in 2007, at $7,271 per room and $7,504 per room respectively.
Overall growth prospects bode well for the hotel industry in 2007, and PKF remains committed to the accommodation industry of Canada and the many initiatives that continue at local, regional and national levels. We thank everyone who participated in this year’s Outlook Survey. For full details of the 2006-2007 Canadian Accommodation Outlook Forum, and to download a copy of the associated presentation or other publications, please visit our website at www.pkfcanada.com.
Brian Stanford, Director
PKF Consulting Toronto
