Hotel price growth in major Canadian cities is expected to moderate next year, according to American Express Global Business Travel’s latest hotel monitor, as leisure travel demand eases and new hotel construction surges. And with “unprecedented growth” underway in Canada’s hotel development pipeline, pricing patterns will likely change over the coming years.
According to the American Express hotel monitor, rate increases will be “muted” in Canada, around one per cent above inflation forecasts. Calgary and Montreal will see 3.2 per cent year-over-year price increases in 2025, the report says, while Ottawa and Toronto are expected to see increases of 3.1 per cent annually. Vancouver hotel prices are forecast to rise 2.9 per cent.
The annual growth rates are lower than in the United States, where the industry is still grappling with a shortage of workers. Hotel prices in New York are expected to increase 4.7 per cent year-over-year, while Las Vegas will see an annual increase of 4.2 per cent and Los Angeles hotel prices will rise 3.3 per cent.
“Part of why (price growth) is slowing down is because some of that post-pandemic leisure travel is levelling off,” Andrea Lofton, a senior consulting manager with American Express Global Business Travel, said in an interview with Yahoo Finance Canada. At the same time, she notes that some new hotels have started to open, as hotel construction in Canada remains robust.
“There were a lot of projects that have started to open in third quarter and fourth quarter, so we’re seeing that… but for the most part, the (ones) that are levelling off is because inflation is coming down.”
Hotel prices soared in Canada post-pandemic amid a surge in travel demand and high inflation. But Canada is now “back to low inflation,” Bank of Canada Governor Tiff Macklem said last month. Canada’s inflation rate fell to 1.6 per cent in September, with traveller accommodation prices falling 5.6 per cent year-over-year. The Bank of Canada expects inflation to be 2.1 per cent in the fourth quarter, dropping to two per cent in the fourth quarter of 2025.
The easing of hotel price increases comes amid an influx of new hotel construction. A separate report from Lodging Econometrics, a hotel industry database firm, tracking third-quarter hotel construction says there is “unprecedented growth in Canada’s hotel development pipeline.” According to Lodging Econometrics, there are 327 projects in the pipeline, accounting for nearly 41,000 new rooms. The report also notes that current construction activity has shown “remarkable acceleration”, with 81 active projects underway, accounting for nearly 11,000 rooms, an increase of 29 per cent in rooms year-over-year.