Over the past three years, Vancouver’s lodging market has experienced unprecedented growth. From 2014 to 2016, occupancy levels increased nearly 10 percent, average daily rates have grown by $27 and RevPAR has maintained double digit growth.
So what’s driving the success of Vancouver hotels? Tourism is certainly a factor – As the Canadian dollar has depreciated relative to the U.S. dollar, more Canadians have opted to travel locally, generating more demand for the Vancouver area. Non-locals are helping drive growth, too; global inbound overnight trips to Vancouver increased 8.1 percent in September 2017.
“A boost in tourism and corporate demand over the past three years has certainly helped support strong lodging fundamentals in Vancouver. This has been further enhanced by the depreciation of the Canadian dollar relative to U.S. and international currencies,” says Mark Sparrow, from JLL’s Hotels & Hospitality Group. “The number of meetings and conventions, airline and cruise ship passengers have all risen year over year, which has helped support strong occupancy rates in the city.”
A limited supply pipeline has also helped Vancouver’s lodging market take off. As one of the highest barriers to entry markets in North America, Vancouver has seen subdued growth over the past five years. Though demand has accelerated recently due to outstanding lodging fundamentals, more than 500 rooms have been taken off the market to be converted to alternative uses.
“We expect to see muted hotel supply growth in Downtown Vancouver over the next few years,” noted JLL’s Luke Scheer. “A limited pipeline combined with increasing demand indicates that room rates will continue to grow.”
Investors are recognizing Vancouver’s rise to the top. 2017 transaction volume in the area totaled approximately $265 million through September, and there continues to be significant appetite for hotel investments in Vancouver.