The worlds of hospitality and industry have always been intertwined. So when the oil crisis hit Alberta this year, the province’s occupancy rates also plummeted. “Corporate travel was dramatically reduced,” explains Dave Kaiser, president and CEO of the Alberta Hotel and Lodging Association. “Two years ago, Calgary was a top-performing city in the Canadian hotel industry. Now Edmonton is outperforming Calgary. That’s unheard of.”
With a dramatic RevPAR decrease of 22.7 per cent over the last year (excluding resort properties), Alberta’s hotel market has drastically changed. According to CBRE Limited, however, the decline hasn’t had a huge impact on the overall mid-scale market numbers nationwide. “Brands are still trying to enter the mid-scale market because it’s the mass-market product which has the broadest appeal,” explains Brian Stanford, senior managing director at CBRE Limited. “It’s a relatively stable segment and we haven’t seen any red flags yet in terms of a saturation point in the marketplace.”
Numbers don’t lie. According to CBRE, Canadian occupancy rates within this segment rose by five per cent between 2012 and 2015, but fell by one per cent in the first half of 2016. That’s not a huge dip considering the dramatic losses in Alberta. Similarly, ADR rose from $117 in 2012 to $140 in 2015 and remained static at $140 in 2016. RevPAR fell only one dollar between 2015 and 2016 to $91 — just $3 short of the RevPAR for all Canadian properties.
Hyatt must have done its research since the brand hopes to open two Canadian locations of its mid-scale brand — Hyatt Place Downtown Edmonton and Hyatt Place Edmonton West — within the next year. Scott Richer, Hyatt’s regional VP of Canadian Development says there’s no real disadvantage to entering the market at this point. “In fact, we see it as a luxury to enter this space a little later than our competitors,” says Richer. “It allows us to choose our Hyatt Place locations carefully and strategically.”
He notes that positioning oneself in the marketplace — both literally and figuratively — can have big impacts on today’s business traveller. “Our advantage is that the brand allows us to expand Hyatt’s presence fairly quickly — and often in urban markets where we previously didn’t have one.”
With so many select-service, mid-scale operations available, it can be a challenge for hotels to attract guests. Richer says the key is customization: “We don’t want to be a cookie-cutter operation. What we’re offering to the Canadian marketplace is something customized to them — different from, say, the prototypical Hyatt Place product.”
In Stanford’s eyes, Hyatt has one advantage over its mid-scale competition. “If you think about it — [the new Hyatt Place hotels] will literally be the only [two] in the system,” says Stanford. “Suddenly, you’re not the second or third Marriott in the system. The timing is good for them.” While each mid-scale property has its standard offerings, explains Stanford, the competition will soon be about the nuance of each brand’s particular profile.
Christie Neate, VP of Operations at the Charlottetown, Prince Edward Island-based D.P.Murphy Hotels and Resorts, says mid-scale operators have to offer more to stand out. “As an ownership group representing D.P. Murphy, but also Hampton Inns and Holiday Inns [brands], we know that guests are attracted to the mid-scale because of the price point, convenience, and the services that are provided.”
However, at D.P. Murphy Hotels and Resorts, guests receive even more perks than at your typical mid-scale hotel. Operating under the motto “Hospitality…like never before”, D.P. Murphy caters to the mid-scale guest in a manner some would consider more representative of the luxury segment. “We offer everything from complimentary shoe shines to free snow removal off of our guests’ cars in the winter,” says Neate. “Another big perk we offer is food. We always have snacks in our lobby and in the winter through spring, we have hot soup and rolls. Guests are also offered a drink upon checking in.”
While business is thriving, according to Neate, troubleshooting for the mid-scale market is still prevalent. “Location is always a challenge. A lot of properties are quite expensive to develop downtown with respect to a mid-scale operation; you always have to ask will you get your return on your investment?”
Manlio Marescotti, area VP of Lodging Development, Marriott Canada, argues that segment growth is taking place in both urban and suburban areas. “Our mid-scale brands are seeing steady growth across the country in major cities — markets currently underserved by mid-scale properties,” he explains. “However, it’s the secondary and tertiary markets that have seen and will continue to see the most growth.” He points to SpringHill Suites as a brand that will see strong growth in Canada. And it’s no wonder considering the franchise was recently recognized by Forbes as one of America’s best franchises to buy in 2016, ranking among the top 10 within the greater than $500,000 investment level.
Despite the growth of this sector, Marescotti cautions hoteliers against inconsistent messaging to guests in the interest of preserving brand integrity. “One of the challenges to the mid-scale is we see a lot of hotel developers tempted to go outside of the brands ‘swim lane’,” he says. “While you can tweak the product ever so slightly — for example by offering more meeting space — you need to be careful to not adversely impact the brand’s operating model and/or market positioning.”
The way in which hotels orient themselves in the market should reflect the shifting expectations of guests. That’s why, in 2016, Choice Hotels Canada conducted an extensive survey, which polled just under 1,600 Canadian travellers about their hospitality choices. The survey results, released this past June, found that an overwhelming number of Canadians (81 per cent) look for discounts or reward points when they travel — suggesting that loyalty cards and reward programs can keep the guests from straying to another venue.
According to Brian Leon, managing director of Choice Hotels, “Consumer expectations of value for money are becoming more demanding and family travellers are seeking mid-scale hotels that have a wide variety of offerings [as well as] good quality rooms and exceptional service that don’t break the bank.” The real challenge for hotels, he says, is trying to keep on top of the wave of improvements. “Our mid-scale properties — like Comfort Inn and Quality Inn — are continually updating. In categories such as bedding and technology, it’s really important to be on the cutting edge.”
Leon says the limited-service, mid-scale market will always be caught in a competitive struggle to win customers. “It’s just the nature of the industry that we will constantly have that ongoing push to attract customers. But it’s kind of a good thing,” laughs Leon. “Staying relevant is critical to the hospitality industry. It’s up to us to keep updating the guest experience.” An example Leon cites is operators’ decision to substitute an underused bathtub with a full-sized, glassed-in shower. “It’s what the majority of people use, so why not improve that space?”
Whether guests are travelling for business or leisure, they expect the latest and greatest, whether it’s technology, services or food-and-beverage offerings. Operators have to embrace the challenge; the reality is it’s a race without a finish line and the guest is the automatic winner.
Written By: Jennifer Febbraro
Volume 28, Number 6