Over the past year, increased concerns about the fundamentals of the Canadian economy and the depressed energy sector have plagued hoteliers and investors alike, translating to cost-cutting measures across the board. In 2014, Halifax-based Holloway Lodging announced it would be internalizing its hotel-management functions after it acquired Royal Host. Last year, Temple Hotels opted to internalize its management services, saving 3.5 per cent of hotel revenues, or about $6.5 million.
But the good news is, the future remains bright for management companies, which are intent on demonstrating their value to the hotel sector. “We have a pretty robust pipeline right now and we’re looking at lots of deals every single day,” says Tony Cohen, EVP, Business Development at Crescent Hotels & Resorts Canada in Toronto. “We would like to expand our presence as much as we can in Canada, but it’s all about strategic growth — we’re not going to take contracts just so we can have another asset.” The types of assets Crescent manages include resorts, upper-upscale full-service hotels, boutiques, convention hotels, premium select-service hotels, and premium limited-service hotels, spanning the Marriott, Hilton, Starwood, Hyatt, Wyndham and InterContinental banners, as well as independent luxury hotels. Last year, Crescent began managing The Westin Prince, Toronto and Tryp by Wyndham Quebec Hotel Pur in Quebec City, bringing its Canadian portfolio to 13 properties.
As a third-party management company, the goal is to increase the profitability of its managed assets, leveraging its size and scope to find savings and efficiencies through all layers of operations. “We bring value to an owner or an asset that maybe they couldn’t [achieve] on their own,” Cohen explains. These go beyond working as an extension of ownership by helping hotels’ culinary operations save money via cost-control and pricing strategy; revenue management; leadership development workshops; group advertising and marketing assistance. “Never should an ownership group look at our fee and think that’s a cost; it should be a fee that is creating more value, more profitability and ultimately increasing their asset’s value,” says Cohen. According to HVS, fees can range from two to three per cent of total revenue, plus a base fee.
As Philippe Gadbois, SVP of Operations at Montreal’s Atlific Hotels notes, management fees don’t vary significantly from company to company. “We all compete on a pretty level playing field. So, sometimes you get contracts because of your relationship with a particular owner or developer. Sometimes it’s pure chemistry — they just like you better than your competitor.”
With about 60 years of experience as an owner and management company, and with a portfolio of 61 hotels across the country, the Atlific team has cultivated a strong reputation in Canada with sales increasing from $424 million to $461 million from 2013 to 2014.
Recent additions to the company’s managed assets include the Element Vancouver Metrotown, Hilton Garden Inn Montreal Airport and the newly opened Courtyard by Marriott and Residence Inn by Marriott, Calgary South.
With regard to future growth, Gadbois has identified Quebec as an ideal area. He’s not alone. According to a new study by Colliers International Hotels, more than half of the investors surveyed indicated they are looking at central Canada (Ontario and Quebec) as the preferred region for investment. “Central Canada is bouncing back,” Gadbois explains. “There are more opportunities in Quebec — Montreal, Quebec City, specifically — than Toronto or Ottawa, for example.” However, due to the nature of the business, companies such as Atlific are not in complete control of their expansion. “Because we’re not developers, we’re at the mercy of the hotel developers or owners who ask us to manage on their behalf,” he explains. “When we have a longstanding relationship with certain developers, they will ask us where they should go next, but that is more a function of where the economic opportunities are.”
Meanwhile, companies such as SilverBirch Hotels & Resorts hold greater control over expansion. SilverBirch is involved in multiple branches of the hospitality industry, including management, ownership and development. The company manages and/or owns a portfolio of 28 hotels operating under the Marriott, Hilton and Radisson banners. It’s hoping to continue its upward sales trajectory, growing from $162 million in 2013 to $196.2 million in 2014. “The most exciting thing happening here is that we’re still building out hotels — even in this down economy,” says Steve Giblin, president and CEO. SilverBirch currently has two 400-room hotels under development: the Marriott Calgary Airport and Residence Inn by Marriott in Calgary’s Beltline district; the latter is set to be the largest Residence Inn by Marriott in the world, Giblin says.
Having the right tools is also essential to SilverBirch’s growth. In addition to offering upselling initiatives to boost sales performance, the company employs a revenue-generation team that uses 12-month forecasting tools to help them react quickly to changing market conditions.
Technology is always top of mind for management companies. As Gadbois points out, this is nothing new. “We are heavily invested in and have staked a lot of our future on technology,” he says. “Because we’re a service business, it ultimately boils down to continuing to deliver at least what our owners expect and, ideally, a little bit more.” To this end, the team at Crescent has focused its resources on keeping up with digital media and distribution technologies, and evolving its sales and marketing division to keep pace. “We have not only increased the size of that department, but we have many more silos,” says Cohen. “Three or four years ago we didn’t have a digital media strategy — now we have several people within the corporate office dedicated to it.”
But, say the experts, beware of sensationalist tech tools and gadgets that won’t stand the test of time. “Many of us have invested in technology that hasn’t been a smart investment two years later, but looked really cool when we saw it,” admits Giblin. “We have the ability to monitor and test [new technology] so that we stay on the cutting edge rather than the bleeding edge of technology.” So what does Giblin predict is here to stay? Plenty of outlets in guestrooms to accommodate the use of personal devices, as well as high-bandwidth Wi-Fi.
Though technology may steer the industry, at its core, it’s all about the people. “Hotels have changed in design, brand, technology, the way they market and communicate with their guests, but the people component hasn’t changed,” says Cohen. However, in the current market, Giblin expects that this resource may be hard to hold onto. “I think that 2016 is going to be a particularly tough year. When the markets get tough, top talent goes where the best compensation is.” And in a down economy there is a greater risk of Canadian talent leaving for opportunities abroad. Offering opportunities for advancement as well as ongoing education also helps mitigate this challenge. Cohen believes that offering ongoing training programs help the company retain its talent. “For us, it’s creating a culture associates want to be a part of,” he says. “Happy associates and a better work environment makes for a better guest experience, which ultimately leads to a more successful asset.”
Volume 28, Number 2
