Hospitality & Leisure
The past year proved to be another record year for Canadian hotel results, with RevPAR reaching a historic high of $142.89, a 4.1% increase over 2024 results. While the overall market performed well, performance was mixed regionally with Ontario and Quebec markets lagging the national average. Trade disputes with the U.S. negatively impacted border markets and regions reliant on U.S. trade such as Southern Ontario. At the same time, the shift in domestic leisure demand from U.S. destinations to Canada proved beneficial, especially to tourism focused markets. In some submarkets, the addition of new supply in the face of slowing demand growth impacted results.
While political and trade uncertainty will continue into 2026, the Canadian market should see continued growth. Similar to 2025, growth will largely be through ADR as demand is expected to remain muted. Markets like Toronto and Vancouver will get an added boost as they host the FIFA World Cup in June 2026. CoStar have projected 1.9% RevPAR growth for Canada in 2026, in comparison to 0.6% growth expected for the U.S.
Operationally, the industry will see continued cost inflation and a more challenging labour situation. Governments continue to reduce the number of international student visas and temporary work permits, impacting the availability of labour for hotels. Escalating costs on non-controllable line items like energy, property taxes and insurance continue to pressure NOI margins.
Despite the continued uncertainty going into 2026, low interest rates and the good level of available investment capital will result in continued strong demand for hotel investments. The industry continues to outperform many other asset classes and continues to attract new capital. As detailed in our report, 2025 ranks among the stronger years for hotel transactions over the past two decades, highlighted by several notable full-service and luxury hotel trades.
