The Canadian accommodation industry has certainly witnessed its share of ups and downs in recent times. However, from 2004 onwards, industry growth has been steady and constant. By year-end 2006, the industry finally pushed national profitability back to near 2000 levels, however these levels are somewhat divided. Although the country is divided between Atlantic, Central and Western regions, from the perspective of the industry bottom line, the division is really between the West and the rest of Canada.
The 2007 Canadian edition of PKF’s Trends in the Hotel Industry Annual Operations Report shows that despite the decline in U.S. visitation and the renewed strength in the Canadian dollar, Canada’s accommodation industry achieved top line revenue gains of 5.8% in 2006 and realized an increase in bottom line profitability of 17.1%1 over 2005 levels. Western Canada far surpassed the national average, recording an 8.6% improvement in top line revenue in 2006, and a bottom line profitability improvement of 32.8%. Central and Atlantic Canada regions lagged compared to the national average, yet still managed to increase bottom line profitability by 3.9% and 5.2% respectively over 2005 levels.
Nationally, full service hotels experienced a $2,659 or 5.5% increase in revenue per available room in 2006 over 2005. This increase resulted in an overall bottom line improvement of 18.5% over the same period.
Limited service hotels experienced a 7.7% increase in total revenue per available room last year, with net income before other fixed charges per available room growing by 12.9%.
2007 Financial Outlook
The Canadian accommodation industry achieved record levels in terms of revenue per available room in 2006, after surpassing 2000 levels by 8.8%. This progress can be attributed to the success and continued growth in average daily rate and occupancy in Western Canada. For 2007, PKF projects that Western Canada will continue to lead the charge among the three major regions in Canada, with improved average daily rates and occupancy levels. These improvements are projected to contribute to strong revenue growth and increase net income per available room by 5.9% nationally in 2007.
Malcolm Jastrebski
Research Consultant, PKF Consulting
1Operating profit is defined as income after property taxes and insurance, management and franchise fees, and capital reserves, but before rent, interest, income taxes, depreciation, and amortization.
