National and Regional Market Outlooks
Following a calamitous year in 2009, for the Canadian accommodation sector, which resulted in a national RevPAR decline of 12.3%, 2010 has marked the beginning of the slow road to recovery in the industry. While the impacts of a precipitous demand collapse and industry-led discounting set a low base line for growth, there has been a change in direction and a positive outlook for 2011 and beyond prevails.
Year-to-date 2010, we have seen marginal increases in occupancy, ADR and RevPAR across all regions, and our expectations are that occupancy levels will grow 1 point, with a 2.75% increase in ADR by year-end. Relative to our 2010 Outlooks prepared in the Fall of 2009, our revised RevPAR forecasts for this year indicate that National results will be at our original outlook of a $76 RevPAR, representing a 4% increase.
When considering the road ahead in 2011, our expectations are for modest but positive growth in occupancy, ADR and RevPAR across all regions. Nationally, occupancy will be up 1 point, ADR up 2.5%, and RevPAR is expected to grow by 4.0%, ending the year at $79.
Regionally, we are forecasting growth in the range of 0.5 to 1.0 points for occupancy, and 2.0%-2.75% in ADR. As a result, RevPAR in Atlantic Canada will be up 4.0%, Central Canada almost 4.5% and Western Canada just over 2.5%. Nevertheless, Central Canada will still end 2011 at 4% below 2008 levels, and Western Canada at 9% below 2008 RevPAR levels, while Atlantic Canada will be back to 2008 RevPAR levels.
National and Regional Financial Outlooks
Based on top line decreases experienced in 2009, the impact on bottom lines was dramatic, with Net Income Per Available Room down 28% to $8,000 per available room.
With projected 4% RevPAR growth in conjunction with rising operating costs, we are forecasting that bottom lines will have increased by 7.0% in 2010 to $8,600 per available room. We will see a 2.5% increase in bottom lines in Western Canada this year, a 2.0% increase in Atlantic Canada, and 12.0% increase in Central Canada.
Based on a further 4% RevPAR growth in 2011, overall, bottom lines are projected to grow by 5.5% on a National level to $9,000 per room. With continued supply pressures, profit levels in the West will be flat in 2011 however it will remain the strongest region in Canada at $11,200 per room. We will see a 9.5% increase in bottom lines for Atlantic Canada to $8,300 per room. Central Canada, while showing the strongest percentage growth rate at 12.0%, with profit levels increasing to $7,400 per room, will still be 34% below the projected Western Canada average and 11% below projected Atlantic Canada results forecasted for 2011.
Over the next five years, we do see industry recovery. Demand is expected to outpace supply, and occupancy is projected to grow at about one point per year. With ADR growth in the range of 2.5% per annum, industry profitability is expected to recover to $12,000 per room nationally by 2015.
As stated at the outset, 2010 has marked the beginning of the slow road to recovery in the industry.
PKF remains committed to the accommodation industry of Canada and the many initiatives that continue at local, regional, and national levels. Full details of the 2011 Canadian Accommodation Outlook can be downloaded from our website at www.pkfcanada.com.
Tyler MacDonald, Senior Consultant
PKF Consulting Inc. Toronto
