Canada: 2009 Lodging Report A Client Advisory on the Construction Pipeline & Forecast for New Hotel Openings
Canada’s Total Construction Pipeline peaked in Q1 2008 at 265 projects/ 33,964 rooms. The Pipeline has declined each quarter since then, with Q4 ending at 237 projects/29,408 rooms. This is a total decline from the peak of 11% by projects and 13% by rooms.
While lodging development has slowed due to the softening economy, lending for development in Canada is more available than in most other countries. Canada’s banks are perhaps the strongest amongst developed economies. Underwriting is more conservative, government regulation is more pronounced, and investment banking is already part of the commercial banking system. Canada is the only G7 nation that has not yet needed to create an economic stimulus program for its banking system.
The Pipeline is dominated by smaller-sized projects in the select service segments. It is easier to obtain financing for such construction, particularly with a globally recognized brand. 80% of all projects in the Pipeline are smaller than 200 rooms, with an overall average project size of 124 rooms. At 31% of total projects, the Midscale without Food & Beverage segment makes up a sizeable portion of the Pipeline, followed closely by Upscale (26%) and Economy (21%). There is also notable extended stay development in each of these chain scales. Contrary to the trend in other regions, Canada has less Independent development in the Pipeline. 84% of all projects have already selected a brand. 70% of the remaining projects are likely to choose a brand prior to opening.