Canada’s hotel industry continued to post a solid performance over the past year, driven largely by leisure travel demand and rising room rates even as occupancy levels begin to normalize, according to a report by Cushman & Wakefield.
Brian Flood, vice-chairman and leader of the Canadian hotel and leisure practice at the commercial real estate firm, said the sector remains on a stable growth trajectory following the strong rebound that followed the COVID-19 pandemic.
“I think the industry has continued to perform very well,” Flood said in an interview from Toronto.
He said the sector experienced rapid revenue growth coming out of the pandemic period as travel resumed and demand surged. While the pace of growth has moderated somewhat since then, positive momentum has continued through 2024 and into 2025.
As detailed in the Hospitality & Leisure report, 2025 ranked among the stronger years for hotel transactions over the past two decades, highlighted by several notable full-service and luxury hotel trades. Despite some uncertainty going into 2026, low interest rates and a good level of available investment capital are expected to result in continued strong demand for hotel investments. The industry continues to outperform many other asset classes and continues to attract new capital.
Some key takeaways:
- The past year proved to be another record year for Canadian hotel results, with RevPAR (Revenue Per Available Room) reaching a historic high of $142.89, a 4.1% increase over 2024 results;
- In 2025, the overall market continued to show growth; however, some markets saw more significant impacts from tariffs and reduced business travel, while other markets saw stronger growth led by increased leisure travel. Overall, occupancy increased to 66.1% in 2025, the highest recorded occupancy in the last 20 years;
- In 2025, RevPAR performance was again led by Vancouver ($223), Victoria ($218), and Toronto ($197). This was followed by Quebec City ($183) and Montreal ($156). Victoria, Halifax and Quebec City were cities with the strongest RevPAR growth in 2025, at 12.3%, 11.3% and 10.9%, respectively;
- 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;
- The outlook for international arrivals is positive, but the rate of growth will be significantly influenced by Canada’s relations with the U.S. and China. Markets like Toronto and Vancouver will get an added boost as they host the FIFA World Cup in June 202
Room Rates Driving Growth
Flood said the primary driver of the industry’s current growth is not occupancy but pricing. Room demand has slowed slightly as hotels approach more typical occupancy levels following the surge in post-pandemic travel. However, average room rates continue to rise at a pace exceeding inflation.
“Room demand has slowed a little as we reach normalized occupancy levels,” he said. “But where we are seeing the growth is in average rate, which continues to increase at above-inflation levels.”
Flood attributed the pricing strength partly to shifting consumer expectations in the travel market. He said travellers emerging from the pandemic appear more willing to spend on higher-quality experiences, which has allowed hotels to adjust pricing accordingly.
“I think people are gravitating toward better quality and better experiences,” he said. “Hotels, in many respects, have enhanced their product as well.”
The result, he said, has been sustained upward pressure on demand in certain parts of the market, particularly leisure travel.
Leisure Sector Outperforming
Flood said the leisure segment has been the strongest-performing area of the hotel industry since travel resumed after pandemic restrictions. While corporate and group travel remain important contributors to hotel revenue, their growth has been more moderate.
“Group and corporate are important parts of the market, but their growth has been a little more muted,” Flood said. “Where we see stronger growth since COVID is in the leisure sector.”
Leisure travellers have also shown a greater willingness to absorb higher room prices, which has contributed to the industry’s rate growth. “In the leisure sector, hotels have been able to increase rates at a higher rate,” he said.
That trend has influenced the geographic distribution of performance across Canada, with tourism-driven markets showing stronger results than business-focused centres.
Tourism Markets Lead Regional Performance
According to Flood, leisure-oriented destinations across Canada recorded some of the strongest gains last year. Domestic travel played a significant role in that performance as more Canadians chose to vacation within the country rather than travelling abroad.
“Part of that was driven by more Canadians wanting to vacation within Canada as opposed to going overseas or to the U.S.,” he said. “So we did see much stronger domestic tourism demand.”
International tourism outside the United States also increased, adding to the momentum in certain destinations. Tourism-heavy regions such as the Maritimes and resort markets in Western Canada benefited most from the shift.
“The Maritimes, for example — Prince Edward Island and Nova Scotia — had very good years last year,” Flood said.
In Western Canada, he pointed to strong results in resort destinations. “We’ve seen markets there do very well, particularly the Rocky Mountain resorts,” he said.
Those destinations are closely tied to leisure travel and tourism activity, which has remained resilient.
Central Canada Sees Slower Growth
By contrast, the largest urban centres in central Canada recorded more modest growth. Flood said hotel markets in cities such as Toronto, Montreal and Ottawa were affected more directly by broader economic factors tied to cross-border business activity.
“Where we saw the least amount of growth, ironically, was in central Canada,” he said.
He said those markets tend to rely more heavily on corporate travel and business linked to the United States, which slowed in response to changes in U.S. trade policy.
“These central Canada markets are much more reliant on U.S. trade,” Flood said. “Industry and corporate definitely slowed.”
As a result, the urban markets that typically benefit from corporate travel did not experience the same pace of expansion seen in tourism-focused regions.
Outlook Remains Positive
Despite the slower growth in some areas, Flood said the overall outlook for the Canadian hotel sector remains favourable. The combination of continued rate growth and stable demand is expected to support performance through the remainder of the year.
Flood said that trend is expected to continue as both domestic and international tourism remain active.
“I think that’s going to continue through the year,” he said, noting that travel demand from both Canadian and international visitors is expected to support the sector.
Measured Development Pipeline
Flood also pointed to a relatively measured pace of hotel development in Canada, which he said has helped maintain balance in the market. New projects are continuing to move forward, but the volume of development remains moderate.
“Within Canada we don’t see as much new development,” he said. “There is new development occurring, but it’s at a very sustainable pace.”
That controlled expansion is likely to support stable operating conditions for existing properties while allowing the sector to grow gradually. Looking ahead, Flood characterized the industry’s trajectory as steady rather than volatile.
“I think going forward we’ll see a gradual expansion of the market,” he said.
For hotel operators and investors, the current environment suggests continued opportunity, particularly as travel patterns stabilize following the disruptions of recent years. “If anything,” Flood said, “what I would say is basically steady as she goes.”
He added that the sector still holds “good earning potential” as the market continues to evolve.
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