In preparation for the 2008 - 2009 Canadian Accommodation Outlook Forums, held in Toronto and Vancouver in October, PKF Consulting examined the top line and bottom line growth potential for the industry nationally and regionally.
PKF Consulting is forecasting RevPAR growth nationally of 3.6% for 2008 and 2.3% for 2009. The PKF forecast for year-end 2008 is 65% occupancy at an ADR of $132, with RevPAR at $86. Our 2009 Outlook is for a 65% occupancy at an ADR of $135, with RevPAR at $88.
Market Outlook by Region |
RevPAR Growth |
National |
West |
Central |
Atlantic |
PKF 2008 Forecast |
3.6% |
5.7% |
2.5% |
2.8% |
PKF 2009 Projection |
2.3% |
3.3% |
1.2% |
1.4% |
On a "National" basis, the Market Outlook is temperate. However, the underlying theme of the WEST (Western Canada) vs. the “REST” (Central Canada and Atlantic Canada) continues to be a major factor in how the National figures come together. Based on a relatively strong year to date performance, PKF is forecasting RevPAR growth of 5.7% in Western Canada for 2008. Our projection for 2009 is 3.3%. Central Canada is forecast to achieve 2.5% RevPAR growth in 2008, and 1.2% in 2009. In Atlantic Canada, we are forecasting 2.8% RevPAR growth in 2008 and 1.4% in 2009.
With regards to the national bottom line, PKF's Outlook is for a 3.5% increase in profitability this year, with no growth projected for 2009. Based on marginal RevPAR growth in conjunction with rising operating costs we are projecting that the National net operating income per room will increase to $12,000 thousand by year-end 2008 and remain at this level for 2009.
Bottom Line Outlook by Region |
Bottom Line Growth |
National |
West |
Central |
Atlantic |
PKF 2008 Forecast |
3.5% |
5.1% |
2.3% |
2.1% |
PKF 2009 Projection |
0.0% |
2.9% |
(2.5%) |
1.1% |
The volume of activity within the oil and gas sector will continue to be a factor throughout parts of Western Canada. In general, it is believed that Western Canada will continue to grow average daily rates but at a more tempered pace than what has recently been achieved. At year-end 2007 Western Canada achieved a net operating income per room before debt service of $14,900. Due in part to operating costs that are rising above inflationary levels, it is anticipated that bottom lines will experience growth in the range of 5.1% in 2008 and 2.9% in 2009. As such, Western Canada is forecast to achieve net operating incomes per room of $15,600 and $16,100 at year-end 2008 and 2009 respectively.
At year-end 2007 Central Canada achieved a net operating income per room before debt service of $9,500. Due in part to rising operating costs and marginal top line growth, profit margins are expected to realize an increase in profitability of 2.3% in 2008 but decline in 2009 by 2.5%, back to 2007 levels. As such, we are projecting Central Canada to achieve net-operating incomes per room of $9,800 and $9,500 at year-end 2008 and 2009 respectively.
At year-end 2007 Atlantic Canada achieved a net operating income per room before debt service of $8.9 thousand. Based on rising operating costs and marginal top line growth, profit margins are anticipated to remain relatively flat, with growth in the range of 2.1% in 2008 and 1.1% in 2009. As such, Atlantic Canada is forecast to achieve profitability per room of $9,100 and $9,200 at year-end 2008 and 2009 respectively.
In addition to examining the top line and bottom line growth potential for the industry on a national and regional basis, PKF also reviewed the performance of the Canadian Accommodation Industry by property type.
Market Outlook by Property Type |
RevPAR Growth |
Full
Service |
Limited
Service |
All Suite Extended Stay |
Resorts |
PKF 2008 Forecast |
3.3% |
5.4% |
(1.0%) |
2.7% |
PKF 2009 Projection |
2.2% |
1.7% |
3.1% |
3.5% |
PKF Consulting is forecasting RevPAR growth for Full Service hotels of 3.3% for 2008 and 2.2% for 2009. Limited Service hotels are forecast to see RevPAR increase 5.4% this year and 1.7% in 2009. All Suite/Extended Stay properties are expected to realize a decline in RevPAR of 1.0% in 2008 but are projected to achieve RevPAR growth of 3.1% in 2009. Based on current performance, PKF's Outlook for Canadian Resorts is a 2.7% growth in RevPAR in 2008, and 3.5% in 2009.
In addition to examining the top line growth potential of the industry by property type, PKF also reviewed bottom line growth.
Bottom Line Outlook by Property Type |
Bottom Line Growth |
Full
Service |
Limited
Service |
All Suite Extended Stay |
Resorts |
PKF 2008 Forecast |
3.3% |
5.3% |
(1.8%) |
4.0% |
PKF 2009 Projection |
0.0% |
0.0% |
(0.2%) |
1.5% |
PKF is forecasting bottom line growth of 3.3% for Full Service hotels in 2008 with no growth projected for 2009. Limited Service hotels are forecast to see a 5.3% improvement in profitability this year, but are expected to remain at that level in 2009. The profitability of All Suite/Extended Stay properties is forecast to realize a decline of 1.8% in 2008, with a further decline of 0.2% in 2009. Canadian Resorts are forecast to see a bottom line growth of 4.0% in 2008 and 1.5% in 2009.
PKF Hospitality Research based out of our Atlanta office, is projecting the average U.S. Hotel will suffer a 3.0% decline in NOI during 2009. In Canada we anticipate Central Canada will experience a similar 3.0% decrease in NOI during 2009, as comparable to the overall U.S. However, due to the projected relative strength of Western Canada’s NOI performance, on a National level the Canadian Lodging Industry’s NOI is projected to remain relatively flat through the year 2009.
PKF remains committed to the accommodation industry of Canada and the many initiatives that continue at local, regional and national levels. For full details of the 2008 - 2009 Canadian Accommodation Outlook Forum, and to download a copy of the associated presentation or other publications, please visit our website at www.pfkcanada.com.
Matthew Cornell Karina Toome
Consultant Research Assistant
PKF Consulting Toronto PKF Consulting Toronto
