Toronto Pearson International Airport (YYZ) is the primary airport for the Golden Horseshoe, an urban agglomeration including and surrounding Toronto that is home to approximately 25% of Canada's population.

Toronto Pearson is the largest and busiest airport in Canada and North America’s second-busiest airport in terms of international passengers. YYZ is well on its way to reaching “mega-hub” status—airports that handle more than 50 million passengers, including 20 million international passengers, and connect to 80% of the global economy.

YYZ has seen an increase in air capacity lately. A number of airlines are offering new routes or have added more flights to existing routes. So far in 2017, Air Canada has launched new international service between Toronto and Mumbai, Berlin, Memphis, San Antonio, and Savannah. In the summer of 2017, WestJet increased the frequency of flights on its routes from Toronto to Orlando, Los Angeles, Las Vegas, Montreal, and Moncton, respectively.

YYZ Passenger Traffic Expected to Set New Record Again in 2017

Source: Toronto Pearson International Airport

Major Projects

• For the past 12 years, the three-terminal airport has been undergoing a $4.4-billion CAD redevelopment program in order to help the airport meet the future air-transportation needs of the Greater Toronto Area. The airport will be capable of accommodating up to 65 million passengers a year by 2033. The Terminal 3 Enhancement Project, which involves improved retail, energy-efficiency initiatives, and new security screening in advance of United States Customs and Immigration Processing, is underway and scheduled for completion this year. In 2016, the capital spending on airport infrastructure amounted to more than $128 million.
• In early 2016, the Greater Toronto Airports Authority (GTAA) announced plans to develop an $11.2-billion regional transit hub to connect the airport area with key employment and residential areas throughout the Greater Golden Horseshoe. The proposed transit centre is to be located on 68 hectares of GTAA land across Airport Road from Terminals 1 and 3. A number of transit lines, such as trains, light-rail cars, and bus lines, would all circulate through the hub. A new mixed-use commercial area that will include office, retail, hotel, and other commercial space will be included in the development. In August 2017, the GTAA launched a Request For Proposal to procure design consulting services for the concept development of the regional transit centre. The target completion date for the project is 2027.
• The new Union Pearson (UP) Express LRT line was launched in June 2015 and is a key infrastructure enhancement that better integrates the airport with Downtown Toronto. As traffic between Downtown Toronto and the airport is expected to double over the next ten years, the rail service will become essential to the efficiency of Toronto’s transportation infrastructure. In addition, the Eglinton Crosstown LRT is expected to connect to the UP Express line upon completion in 2021, enhancing the accessibility between the airport and the northern Toronto area. The impact of the UP Express LRT on the YYZ hotel market has been generally positive, especially since the increasing rates at downtown hotels have been encouraging customers to stay in the airport area. Hotels that are farther away from the UP Express train station have yet to see any direct benefit aside from a small amount of overflow demand from hotels that are close to the train station, such as the Sheraton Gateway Toronto Airport and the Alt Hotel Toronto Airport, during periods of compression.
• In April 2017, Woodbine Entertainment Group (WEG) unveiled the completed master plan for the Woodbine Racetrack lands. Woodbine’s privately owned 684-acre site will be transformed in the years to come into “a city within a within a city,” creating a new urban heart for northwest Toronto. The vision would have Woodbine remain the ultimate destination for horse racing and gaming while adding new and expanded entertainment and cultural offerings, including dining, hotel, shopping, office space, post-secondary education, recreation, and health and wellness amenities, along with options for urban residential living. A new concert venue with the ability to accommodate as many as 5,000 spectators could also be built next to the racetrack. The first phase of development includes an expanded gaming district complete with integrated entertainment, hospitality, and related amenities. The first phase will attract approximately 12 to 15 million people per year, more than double the current number of visitors. In August 2017, the Ontario Lottery and Gaming Corporation announced the chosen operator for the new full-fledged casino, a consortium formed by the Great Canadian Gaming Corporation and Brookfield Business Partners. Woodbine is hoping to break ground on the project by next fall. At the end of September 2017, the City of Toronto still had the applications for rezoning and subdivision under review.

Hotel Market Supply

According to STR, there are more than 10,000 hotel rooms in the Toronto Airport/West region. The area thus has more hotel rooms than some major Canadian cities, including Calgary, Ottawa, Quebec City, Halifax, Winnipeg, and St. John’s. The market has seen strong growth in the past three years.

In the discussion of the factors affecting the near-term vitality of the Toronto Airport hotel market that follows, the focus is on the 23 hotels that are located along the Airport Strip, defined as the portion of Airport and Dixon Road between Derry Road East and Martin Grove Road. Together, these hotels have more than 6,000 rooms. These lodging facilities generally perform better than the hotels that are more distant from the Airport Strip. Since 2015, HVS has completed more than 15 engagements on the Airport Strip. 

Hotels on the Toronto Airport Strip

Source: HVS

Largest Portion of Branded Rooms on the Toronto Airport Strip = Upper-Upscale Class
Largest Portion of Branded Rooms in the Country = Upper-Midscale Class

Source: STR

Supply Changes

There has been no new hotel development on the Toronto Airport Strip since the opening of the Alt Hotel Toronto Pearson in 2012. Given the ongoing improvement in overall market fundamentals, however, the market has seen numerous changes in hotel ownership during the past three years. With these sales have come a number of major hotel renovation, repositioning, and rebranding initiatives.

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