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Niagara Falls: With Supply Comes Demand

CANADIAN LODGING OUTLOOK
March 2001 Year-to-Date
The Canadian Lodging Outlook is a joint monthly publication 
of Smith Travel Research and HVS International, 
Vancouver and Toronto, Canada

 
Jon Lantz, Managing Director, HVS International� Toronto, May 2001

Niagara Falls has evolved from a number of small, independent owner operated motels to Canada's sixth largest accommodation market. The original family- run businesses were built to provide lodging for people from around the world who came to see Niagara Falls. This natural wonder is truly a magnificent site with spectacular waterfalls on both sides of the Canada/United States border. As the amusements continued to be built and more people travelled to Niagara Falls for family vacations or to get married. Niagara Falls quickly became the honeymoon capital of North America with its heart shaped bathtubs and fireplaces.

This began to change when one of the local families decided to invest millions of dollars in constructing an upscale, full service hotel overlooking the Horseshoe Falls. The 295- room Sheraton-Fallsview opened in 1991 in the middle of one of North America�s worst recessions. The property managed to succeed in spite of this and laid the framework for a new direction for the lodging industry in Niagara Falls.

The market changed again when the Ontario government selected Niagara Falls as the site for its� second major casino. Casino Niagara was constructed between two older hotels and a retail complex, known as Mapleleaf Village at the entrance to the Rainbow Bridge. The cost of the casino was $130-million and it is considered one of the finest casinos in North America. This facility attracts more than 9- million people per year with total visitation to Niagara Falls Region around 13.4-million people.

This new demand prompted local developers to build new properties. Since the casino opened, a 285-room Marriott hotel, a 258-room Courtyard by Marriott, a 537-room Hilton Hotel, and an expanded 235-room Radisson Hotel complex were constructed.

There were also several additions to existing properties including the Sheraton (formerly the Foxhead Hotel), the Sheraton-Fallsview, and the Sheraton Four Points. This added an additional 458 rooms.In total, there have been 1,773 new rooms added since Casino Niagara opened in December 1996.

In 1999, the government awarded the Hyatt Corporation the rights to construct and operate the new permanent casino and a 350-room Hyatt Hotel. This project is expected to begin construction this year with the opening approximately three years away. The Marriott is also completing a 150-room expansion.

There are approximately 11,000 rooms in Niagara Falls, Canada. Smith Travel Research and HVS International track the operating results of 5,540 of these rooms. They represent the mid-size to larger chain-affiliated motels and hotels. In spite of the supply increase during the past four years, occupied roomnights have increased by 27.0% while supply grew by only 13.2% in the sample. Equally important, is the growth in average daily rate (ADR) during this period. In 1996, the ADR was $84.09 and in 2000 this number rose to $120.36. This is a 43.0% increase in rate.

This tremendous growth reflects the ability of new properties and new venues to induce demand in what is perceived to be a stable market. The new, upscale hotels have shown that there is a segment of demand that was not being met. Additionally, Casino Niagara raised the profile of the market to be multi-dimensional. The world-class Butterfly Conservatory has added to this image as well.

There are numerous additions to supply noted by the planning department. Many of these have been of record for years and only a few new hotels will likely be constructed. The limiting factors in today�s market include; the availability of land near the Falls or the Casino, the lending environment that currently exists for new hotels in Canada, and the need for a type of product that would stimulate demand.

In conclusion, this market should continue to grow and prosper. The dynamic market has demonstrated that there is latent or unsatisfied demand that can be stimulated by new hotels and new attractions. There are plans to construct a large conference centre, major theme park and several new golf courses in Niagara Falls. There is also a transition occurring on and near the older amusements/ attractions in the Clifton Hill area as owners choose to build family entertainment/retail venues such as Planet Hollywood, the Hershey Factory, and Rainforest Café.

In spite of the supply increase during the past four years, occupied roomnights have increased by 27.0% while supply grew by only 13.2% in the sample .
 


CANADIAN LODGING OUTLOOK
HVS INTERNATIONAL - CANADA
March 2001
Year-to-Date

March 2001
Year-to-Date
Number of Rooms Occupancy Rate % 2001 Occupancy Rate % 2000 Average Room Rate $ 2001 Average Room Rate $ 2000 RevPAR $ 2001 RevPAR $ 2000 Room Supply % Change Room Demand % Change
Nova Scotia Area 1,103 50.8% 51.3% $71.16 $68.35 $36.15 $35.06 0.0% -1.0%
Halifax, NS 2,286 59.0% 55.0% $100.22 $97.75 $59.13 $53.76 0.0% 7.4%
Montreal, QC 13,868 58.4% 56.6% $122.46 $113.34 $71.52 $64.15 1.1% 4.3%
Quebec City, QC 3,588 53.4% 56.0% $101.05 $98.28 $53.96 $55.04 0.2% -4.5%
Quebec Area 3,786 46.7% 44.5% $76.18 $72.86 $35.58 $32.42 0.0% 5.0%
Toronto Downtown 11,636 59.4% 57.3% $142.96 $137.17 $84.92 $78.60 0.8% 4.4%
Toronto North/East 6,369 55.4% 55.8% $103.80 $103.03 $57.51 $57.49 1.4% 0.7%
Toronto Airport/West 8,961 70.3% 68.6% $114.67 $109.57 $80.61 $75.17 2.8% 5.4%
Ottawa, ON 7,439 64.7% 62.3% $124.57 $111.35 $80.60 $69.37 -1.5% 2.2%
Ontario East 4,660 48.7% 49.5% $85.32 $79.69 $41.55 $39.45 1.5% -0.2%
Niagara Falls, ON 5,416 36.9% 40.4% $85.44 $80.94 $31.53 $32.70 6.4% -2.8%
Ontario Southwest 5,431 53.9% 53.7% $95.60 $90.58 $51.53 $48.64 0.9% 1.3%
Ontario North 4,265 52.0% 52.9% $82.96 $80.13 $43.14 $42.39 0.3% -1.5%
Ontario Central 7,085 54.9% 53.0% $87.21 $82.96 $47.88 $43.97 0.3% 4.0%
Winnipeg, MB 3,230 58.5% 59.2% $87.49 $83.47 $51.18 $49.41 2.4% 1.3%
Regina / Saskatoon, SK 3,675 62.3% 65.4% $81.34 $78.18 $50.67 $51.13 3.5% -1.5%
Calgary, AB 7,387 58.1% 57.9% $105.82 $105.21 $61.48 $60.92 6.4% 6.8%
Edmonton, AB 5,244 62.2% 57.7% $85.17 $81.13 $52.98 $46.81 1.1% 9.0%
Alberta Area 5,071 60.1% 59.3% $76.46 $73.45 $45.95 $43.56 1.9% 3.2%
Mountain Regions, AB 2,461 59.6% 66.3% $154.47 $139.98 $92.06 $92.81 0.0% -10.1%
Vancouver, BC 11,480 57.4% 54.4% $114.11 $110.88 $65.50 $60.32 2.7% 8.4%
British Columbia Area 4,617 41.6% 43.1% $67.94 $65.85 $28.26 $28.38 1.2% -2.4%
Victoria, BC 2,950 50.1% 47.2% $84.72 $81.34 $42.44 $38.39 0.0% 6.0%
Provinces
Alberta 20,163 59.9% 59.4% $98.62 $96.38 $59.07 $57.25 2.3% 3.1%
British Columbia 22,391 54.7% 53.6% $127.02 $118.37 $69.48 $63.45 1.8% 3.9%
Manitoba 3,433 58.7% 59.4% $86.48 $82.47 $50.76 $48.99 2.1% 0.9%
New Brunswick 2,701 55.0% 57.9% $81.38 $78.57 $44.76 $45.49 0.0% -5.0%
Newfoundland 1,521 58.4% 52.1% $89.01 $84.77 $51.98 $44.17 1.3% 13.7%
Nova Scotia 3,389 56.2% 53.7% $90.98 $87.58 $51.13 $47.03 0.0% 4.7%
Northwest Territories INS INS INS INS INS INS INS INS INS
Ontario 60,823 56.8% 56.6% $110.50 $105.17 $41.33 $59.53 1.3% 1.7%
Prince Edward Island 784 37.4% 33.3% $58.94 $57.15 $32.65 $19.03 0.0% 12.1%
Quebec 21,681 55.4% 54.3% $111.90 $104.72 $62.89 $56.86 0.5% 2.5%
Saskatchewan 5,166 56.2% 58.2% $76.82 $73.79 $31.19 $42.95 2.0% -1.5%
Yukon Territory 384 40.6% 37.0% $75.55 $76.96 $39.89 $28.48 0.0% 9.8%
Canada 142,436 52.8% 53.1% $93.99 $88.33 $49.63 $46.90 1.4% 0.9%
© Smith Travel Research, 2001. Reproduction or quotation in whole or in part without permission is forbidden. *INS - Insufficient Data


HVS Toronto, led by Jon Lantz and Lorenzo Palumbo, in conjunction with Betsy MacDonald, MAI, AACI, (Managing Director of the Vancouver office), to diversify the range of services for our Canadian clients, established Hospitality Venture Services, Inc., Real Estate Broker. Now, in addition to appraisals, market studies, valuations, and the variety of consulting services offered, HVS Toronto provides immediate access and extremely strong contacts in hospitality brokerage in Canada. For further information, contact HVS Toronto at (416) 686-2260.

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Contact:
Kimberley Tyls
HVS International 
4235 Prospect Road
North Vancouver, BC V7N 3L6
(604) 988-9743, ext. 21
[email protected]
www.hvsinternational.com

Also See Does Supply Generate Demand? / The Canadian Lodging Outlook / May 2001 
Limited-Service Growth in Canada - Where�s it Going? / The Canadian Lodging Outlook / January 2001 
Optimism With a Hint of Caution, As Analysts Predict a Softer Year for the Canadian Hotel Industry / Mar 2001 
HVS Canada in Review - Year End 2000 / The Canadian Lodging Outlook / March 2001 
Canadian Lodging Outlook / May 2000 Year to Date Statistics / HVS International - Canada / July 2000 
The Rule of Thumb Method...Does It Still Hold Weight? / Elaine Sahlins - HVS / Oct 2000
What�s Hot and What�s Not in Western Canadian Hotel Markets / Mar 2000


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