Unique Factors Shaping the Buffalo Lodging Market | From the Christian Cross

As a border town, Buffalo has historically been heavily dependent on Canadian visitors and American travelers who stop on their way to/from Canada to seek shelter. Based on a recent hotel market study and the many hotel evaluations in the greater Buffalo-Niagara area that I have conducted, it is clear that the volume of land crossing traffic has an impact on these border markets. Below is a brief timeline of the change in border crossing restrictions from 2020 to 2023.

Key dates for border crossing restrictions Source: HVSKey dates for border crossing restrictions Source: HVS
Key dates for border crossing restrictions Source: HVS

As the one-year anniversary of the lifting of all COVID-19 border restrictions recently passed, I wanted to take a look at key metrics for Buffalo’s lodging market and data on crossings at the Peace Bridge, an international land border that connects Buffalo at Fort Erie in Ontario, Canada.

*Crossings reflect automobiles entering the US from Canada (excluding trucks and commercial dedicated lane crossings) Source: Buffalo and Fort Erie Public Bridge Authority
*Crossings reflect automobiles entering the US from Canada (excluding trucks and commercial dedicated lane crossings) Source: Buffalo and Fort Erie Public Bridge Authority
Note: occupancy levels do not include all hotels in the market, but constitute a representative sample Source: STR, Buffalo and Fort Erie Public Bridge AuthorityNote: occupancy levels do not include all hotels in the market, but constitute a representative sample Source: STR, Buffalo and Fort Erie Public Bridge Authority
Note: occupancy levels do not include all hotels in the market, but constitute a representative sample Source: STR, Buffalo and Fort Erie Public Bridge Authority

As illustrated above, the depth and duration of the impact of the COVID-19 pandemic affected the two metrics slightly differently based on the nature and extent of restrictions on businesses and restrictions imposed at border crossings. With the availability of vaccines and the lifting of many business restrictions, utilization generally improved in 2021, although the Omicron variant slowed the recovery in the latter part of the year. However, international border crossings fell in 2021 as the border remained closed to all non-essential travel for most of the year and then reopened with heavy restrictions in place. With border restrictions fully lifted in early 2023, both international crossings at Buffalo and occupancy levels increased.

We note that 2024 will be the first year since 2019 that border restrictions related to COVID-19 will not play a role in local border crossings or Buffalo hotel occupancy. Neither metric has fully recovered to pre-pandemic levels, largely because of a third variable that plays an important role in both: exchange rates. Buffalo is a convenient stopover destination for Canadian travelers heading south for vacation, and US duty-free exemptions have historically made shopping in New York an attractive weekend getaway for Canadians; however, these trips are more attractive when the US dollar is not as strong, as was the case in 2018. While exchange rates were also lower in 2021, the Buffalo market did not see the typical benefits given the aforementioned border restrictions.

Historical USD to CAD exchange rate from January 2018 to April 2024 Source: Federal Reserve Board
Historical USD to CAD exchange rate from January 2018 to April 2024 Source: Federal Reserve Board

Final Thoughts

The Buffalo lodging market has historically benefited from the significant demand generated by Canadian travelers, and this source of demand will continue to play an important role in the future. While occupancy levels have not fully recovered from the negative impact of the COVID-19 pandemic and related cap restrictions, double-digit annual rate growth allowed market RevPAR to surpass pre-pandemic levels in 2022 and significantly exceed those levels in 2023. Data for 2024 illustrates a continued upward trend, enhanced by the impact of the solar eclipse, during which Downtown Buffalo was in the path of totality for 3 minutes and 45 seconds.

Our positioning within local markets enables us to conduct primary interviews with key market participants. This approach ensures that we receive real-time insights and current data for each market in which we operate. For more information about the Buffalo market or for assistance in making informed investment decisions that match your goals and risk tolerance, please contact Christian Cross, your local HVS Upstate New York hospitality expert.

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Image Source : www.hospitalitynet.org

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