The awe-inspiring power of Niagara Falls draws people from across the world to the Ontario side of the gorge – over 13 million per year, to be exact.
Lured in by the Eighth Wonder of the World, they stay for the casinos, the wine route and the Shaw Festival Theatre, spending $2.4bn a year. The majority of those folks are Canadians exploring their own backyard, but more than 3 million come up from the U.S.
Or at least they used to. Under the misty haze of a trade war, political turmoil and economic uncertainty, fewer are coming every month. In May, the number of U.S. residents driving across the border fell 8.4% from a year ago, the fourth consecutive month of decline, Statistics Canada said. Arrivals by air also have fallen year over year for three of the last five months.
With Americans staying home – or at least out of Canada – CBRE Hotels has downgraded its 2025 forecast for the Niagara Falls market.
When its 2025 Canadian Hotel Outlook was published last fall, CBRE predicted the market would lead the nation in terms of growth. Revenue per available room (RevPAR) was forecast to rise 6.1% over 2024 to $159 (at the time, the 2024 projection of $150 was lowered to the actual tally of $142).
Now, as of the first quarter, CBRE expects Niagara Falls to see a 2% decline in RevPAR over 2024, to $139. That’s the biggest percent decline nationally.
Average daily rate (ADR) projections also are being lowered. Previously pegged to $245, that figure is now $215 (CBRE expected the 2024 figure to be $238, but it landed at $221).
“Niagara Falls is a city that relies heavily on that cross-border U.S.-Canada traffic. It is a market that needs that U.S. customer,” Nicole Nguyen, senior vice president with the CBRE Hotels Valuation and Advisory Services group, told Green Street News.
“With the current rhetoric and policies in place, there’s been such a decline in leisure travel, and we’re seeing this play out in Niagara Falls. As much as Canadians have said, ‘I’m not going to the U.S., elbows up,’ Americans have said, ‘I don’t know what’s going on, maybe I’m just not going to leave the country.’ So that’s why we’ve really had to move the needle on where we thought this market was headed.”
That said, the pervasive elbows-up rhetoric actually may help push the needle back.
In May, the number of Canadian residents returning home from the U.S. by car dropped 38.1% compared with a year ago. And return trips by air fell 24.2% year over year. Both metrics have fallen for five months in a row.
From Sea to Sea to Sea, Canadians are exploring. And Niagara Falls’ hotel operators are anticipating a patriotic boost.
“While the trade tensions have impacted U.S. visitation, the Niagara Falls hotel market on the Canadian side has seen a strong boost in domestic travel. Canadians are choosing to explore locally, helping offset declines and driving a healthy rebound in occupancy and tourism activity,” Christina Parsons, operations, sales and marketing coordinator at Vrancor Group, told Green Street News.
The Hamilton-based firm acquired the Niagara Fallsview Hotel & Suites for $64m in December, a “strategic and logical next step” for the company’s portfolio, which also includes the Holiday Inn Express Niagara-on-the-Lake and Staybridge Suites Niagara-on-the-Lake.
Since the acquisition, “we’ve seen strong demand driven by economic growth and a rise in domestic travel,” Parsons said. “The market is recovering well, and our hotel is well positioned to benefit from this positive momentum as we focus on maximizing occupancy and enhancing guest experience in the short term. … The long-term outlook for the Niagara Falls hotel market is highly promising.”
K2 Group, whose hotel portfolio in the Niagara region spans both sides of the border, is likewise seeing increased domestic demand in its Canadian properties. The firm has noted longer stays and higher discretionary spending on the part of U.S. visitors who do make the trek, thanks to the favourable exchange rate.
Thomas Jacob, managing director at Mississauga-based K2 Group, pointed to the region’s investment in new attractions and infrastructure – like the OLG Stage at Fallsview Casino and Niagara Takes Flight – as further demand boosters that will keep the market “fresh and competitive.”
“While some sectors may be feeling the effects of trade tensions, the hospitality market in Niagara has remained resilient due to these evolving travel behaviors,” Jacob told Green Street News. “Despite broader economic friction between Canada and the U.S., Niagara’s tourism sector has held strong.”
On the investment front, Jacob added that trade tensions have led to tighter underwriting as lenders and investors approach deals with caution. But capital continues to flow, albeit with a heavier focus on ADR assumptions, cross-border traffic and cost inflation. More emphasis also is being placed on the quality of sponsors and operators.
Still, K2 has committed more than $100 million to hotels on both sides of Niagara Falls: “This reflects our conviction in the long-term strength and investment potential of the market,” Jacob said.
“We view Niagara as a cornerstone in our broader North American growth strategy. Having made some of our foundational acquisitions here, the region continues to play a key role in our long-term strategy,” he added. “We also believe Niagara will continue to evolve as a destination, and we want to be part of shaping that future.”
While some prospective purchasers may pause until there is greater clarity, current Canada-U.S. relations have become “just another factor” buyers need to consider when looking at the region, rather than a reason to stay away from it, said Curtis Gallagher, principal and Canadian hospitality Lead at Avison Young.
Both Gallagher and CBRE’s Nguyen noted that hotel sales are not typically significant in the market – regardless of political tensions – as most major properties are owned by a handful of private legacy operators.
To that end, while CBRE expects a momentary drop-off in performance, there is no “functional issue” with the market, such as an oversupply, Nguyen said, and any declines are expected to correct themselves over time.
“This is a bump in the road. But it’s a bump in the road that will lead some people to say, ‘Maybe we should just hold until things settle,’ ” Avison’s Gallagher said. “But there aren’t big implications on metrics, because over time assets in Niagara Falls have performed well and will continue to perform well.”
“The demand for that market is not going away. And as the areas around the GTA continue to grow, I think demand will continue to grow. I mean, the only fear is if Niagara Falls dries up, but then I think we all have bigger problems.”
