Toronto: how rental restrictions will help hoteliers
The proliferation of the online property rental platforms such as Airbnb, HomeAway, and VRBO, have made
Toronto aims to follow the example set by Barcelona, Vancouver and San Francisco. In early December 2017,
Similar restrictions exist in many cities around the globe:
- In Barcelona,
short-termrentals are only allowed with a licence from local authorities, but the issuance of this license has been suspended since June 2014.
- Berlin has prohibited the lease of entire homes since May 2016.
- Vancouver will only allow the lease of properties permanently occupied by the owner under a special licence from April 2018.
- In San Francisco, property owners have been allowed to lease apartments for short terms only if they are permanently residing there. Otherwise, the rental term cannot exceed 90 days per annum.
Today, Airbnb features over 4 million listings in 191 countries, which, according to Bisnow, exceeds the total room capacity of the five largest international hotel chains. The number of bookings performed via the platform since 2008 exceeds 200 million.
According to Airdna, as of January 2018, Toronto has 12,700 Airbnb listings, 64% of which are entire homes. According to HVS, as of September 2017, the city had approximately three times as many hotel rooms (36,500).
A similar market reaction can clearly be seen in Berlin, where, since May 2016, only
A chance for investors
Toronto is the most popular Canadian city among tourists. According to Mastercard, between 2012 and 2016, the number of international tourists staying in Toronto for at least one night increased from 3.5 million people to almost 5 million, and, the company expects this figure to grow by another 6.2% in 2017. The number of tourists from China has grown by 77% over the past five years. In 2017, 321, 000 Chinese nationals visited Toronto.
The demand for hotel accommodation in Ontario outpaced supply for the past few years. According to the preliminary estimates by CBRE, demand grew by 2.5% in 2017, while supply only increased by 0.9%. Analysts estimate the average daily rate (ADR) in Toronto to have risen by 22% to $169 and the revenue per available room (RevPAR) by 30% to $126. This demonstrates that the demand is outpacing supply, even when
The hotel room occupancy rate in Toronto is expected to grow. According to HVS, it already exceeds 85%. This will give hoteliers an opportunity to raise the ADR at a faster rate, given that it is less in Toronto than comparable cities in the United States (New York City: $389; San Francisco: $320 as of Q4 2016, according to Statista).
This would lead to growing tourist accommodation expenses as well as growing revenues and returns for investors in the hotel segment of the commercial property market. Given that investment
Denis Borisenko, Yulia Kozhevnikova, Tranio
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