Hotel prices in Toronto expected to rise next year. Here’s why

Travellers checking into Toronto hotels next year could see higher prices next year, with rates forecasted to rise about seven per cent, according to a recent report.

According to American Express Global Business Travel’s (GBT) Hotel Monitor 2024, higher rates are expected across Canada after a “record-breaking” 2023.

The hotel monitor scoured price trends in 80 cities worldwide, and for Toronto, prices are expected to rise by 6.7 per cent next year. Comparatively, Vancouver is forecasted to see a nearly nine per cent jump in hotel prices.

Though rates are rising, Dan Beauchamp, head of consulting for Amex GBT, noted they are moving at a slower pace, as they are moderately increasing compared to what the industry saw last year.

“For one, there are signs that the wave of leisure demand which pushed up prices is now subsiding,” Beauchamp said in the report. “And on the supplier side, the rising number of unsolicited bids suggests that hotels are ready to engage with corporate customers.”

Based on Destination Toronto’s market performance dashboard, which analyzes the city's "visitor economy," there has been a nearly 18 per cent increase in demand for a place to stay in Toronto as of August 2023 compared to last year. Additionally, hotel occupancy rates are at 68 per cent, which is nearly a six per cent jump.

Andrew Weir, executive vice president of Destination Toronto, told CTV News Toronto 2023 had been a strong year for leisure travel – especially with cross-country visitors – with the city attracting visitors with its vibrant music and theatre scene as well as its internationally-recognized culinary establishments. But the number of travellers visiting from abroad has still not come close to a full return prior to the pandemic, Weir noted.

“Toronto has a very diversified visitor economy … so when the domestic leisure market is strong, but the international market is still lagging, then the overall leisure market is still behind,” Weir said. “When the convention market is strong, but the transient market is soft, then the overall business travel has also not fully recovered.”

“So, what we’re seeing now is a recovery of some key segments, but still significant lag behind prior levels,” Weir added.

President and CEO of the Greater Toronto Hotel Association (GTHA), Sara Anghel, echoed Weir’s sentiments, saying travel is still lagging 10 to 15 per cent from pre-pandemic levels. The next three years could also see dwindling numbers of travellers, particularly with the business market, Anghel added.

“In fact, ’24, ’25 and ’26 are not looking to be as good years for the Toronto market as ’23 was,” Anghel said. “Because, again, it’s pandemic-related that there were a lot of ‘maybe’ event planners that wanted to take a look at Toronto and looking out (at) future years. But, because things were not opened up as soon as the U.S. was opened up, they just ended up staying stateside and they’re not bringing the business in Toronto.”

Senior Vice President of CBRE Hotels, Nicole Nguyen, told CTV News Toronto it is important to note with Amex’s report that it is likely considering only its clients, adding the CBRE is forecasting a smaller increase of three-and-a-half to four per cent in Toronto (which includes the Greater Toronto Area).

“Our view is that next year will really be a year where we see more moderate growth, obviously that is, in part, because we had such robust growth the last couple of years,” Nguyen said, adding the “crazy trajectory of very high level growth” following COVID-19 travel restrictions had to eventually taper off.

According to Nguyen, the average rate for hotel stays in downtown Toronto – for the whole year of 2023 – is forecasted at $322 a night, reflecting about a 10 to 11 per cent rise from over 2022.

“That’s just where pricing is today. I mean, I don’t think it’s good or bad, or I certainly don’t think it’s gouging,” Nguyen said, noting the industry is in a recovery cycle.

“Just like Tim Hortons has increased the price of your coffee and the airlines have increased the prices of their flights, hotel rates have increased, their labour is more expensive, all their input costs are more expensive, and so, you know, they’re reflecting that in the pricing of their hotel rooms.”