The Canadian hotel market is continuing its positive operating performance. The average room rate is up 5.9%, as of June 2000, with a slight decrease in occupancy from 59.9% to 59.2%. These mid-year results are encouraging, given the lower occupancies experienced across the country for the first few months of the year.

Ontario saw an 8.1% increase in the average room rate with occupancy declined 1.5% points. Ottawa was the hottest market in Ontario during the first half of the year with an 11.1% increase in average room rate from $100.66 to $111.80 coupled with an increase in occupancy from 66.5% to 67.1%. RevPAR for Ottawa increased by 12.1%, while room supply increased 5.9%. Ottawa will continue to have supply additions, especially in Kanata, to accommodate the hyper-growth of the hi-tech sector. Niagara Falls continues to do well and to absorb new product. Its average room rate increased from $94.51 to $99.47, occupancy decreased from 54.0% to 53.1%, while room supply increased 4.6%.

The overall Toronto area experienced growth in average room rates with slightly lower occupancies due to reduced travel because of Y2K. The Toronto Airport/West market is hot with the highest occupancy rate in Canada at 74.0% for the first six months of the year and a 7.7% increase in average room rate. The Toronto Airport node will continue to do well, since it has had no new supply in
the last 10 years. There is a scarcity of land and the $5 billion redevelopment of Lester B. Pearson International Airport, over the next 20 years, will double passenger capacity. The only proposed increase to the supply is a new
Courtyard by Marriott in 2001. The Toronto West area expects to continue to grow as Mississauga and Brampton become fully developed during the next 10 years. Supply additions include a Studio 6, Best Western, Comfort Inn, Holiday Inn Select, Courtyar by Marriott, Residence Inn and Motel 6. New supply in the market is based on new office and industrial development, vacant land at reasonable prices, lower real estate taxes. 

Toronto Downtown achieved the highest average room rate in Eastern Canada at $156.30 up from $145.34. Its occupancy rate fell from 71.3% to 67.8% due to less corporate travel early in the year and some new supply. However, the future room supply will be limited, due to scarcity of vacant buildings, land, and their high price. Als Downtown Toronto hotel real estate taxes are some of the highest in North America, further impeding development. Toronto North/East also experienced increasing room rate with lower occupancy rate. Both of these nodes are expected to experience new supply, including the 120 - room Staybridge Suites, a Courtyard by Marriott, Residence Inn by Marriott, Hilton Garden Inn and two other hotels with undecided flags.

Quebec bucked the national trend with occupancy increasing ever so slightly from 62.3% to 62.5% with a 7.4% increase in average room rate. Quebec City is a hot market as room demand increased 4.1% in 1999 followed by an encore performance as it increased 6.5% in the first half of 2000 with nominal supply increase. Consequently, the mid-year occupancy rate jumped from 60.9%
to 64.5% with the average room rate moving up from $102.80 to $110.62. This 14% increase in RevPAR was the highest in Canada during the first six months of 2000. Montreal is doing well and is expected to improve based on its high growth in three technological areas; aerospace, pharmaceuticals, and Internet/multimedia. Occupancy rate increased from 64.9% to 65.1% with the average room rate increasing from $117.66 to $125.32. Its RevPAR increase of 6.8% was strong for the first half.

The Maritimes have not done as well this year, relative to last year with the exception of P.E.I. This province achieved a room demand increase of 3.9%, resulting in the occupancy rate increasing from 41.9% to 43.5% and the average room rate increasing from $75.12 to $79.90 at mid-year. Nova Scotia and Halifax saw demand decrease and lower occupancy but still managed a strong average room rate increase in excess of 9.0%. Newfoundland and New Brunswick also experienced demand and occupancy rate decreases with some average
rate increases resulting in flat RevPAR.

In summary, Quebec City and Montreal will continue to improve due to minimal supply. Ottawa, Niagara Falls and Toronto Airport / West are doing well but will be tested with new supply. Toronto/Downtown will be resilient and can absorb supply if, and when it is created given the high barriers to entry. The Maritimes have unused capacity and are relatively stabilized thus requiring additional
economic stimulus. Halifax and Nova Scotia should have a better second half with expected tourism travel increases.