According to a recent Canadian Lodging Industry Overview: Hospitality & Gaming released by Cushman & Wakefield’s Valuation & Advisory team, 2022 will be remembered as a pivotal year for the hospitality industry as markets across the country saw RevPAR exceed pre-COVID levels for the first time.
“The onset of COVID-19 caused a RevPAR decline of 60 per cent in 2020. The beginnings of the recovery started in 2021 with a 35-per-cent improvement in RevPAR,” reads the report. “After a weak Q1, the recovery took hold in Q2 with RevPAR increasing by 95.3 per cent 2022. The data shows the growth was largely fueled by ADR growth as demand still lags behind pre-COVID levels.”
A closer examination of 2022 results shows that January and February got off to a slow start as a result of the Omicron variant and some renewed government restrictions. But with the lifting of most significant restrictions by early February, leisure travel began to pick up over the balance of Q1.
“Leisure demand remained strong through the summer, supplemented by increased group demand in some of the major markets. Increased demand in peak periods allowed for rate increases, driving ADR to record high levels. RevPAR increased by an unprecedented 157 per cent in Q2, followed by growth of 106 per cent in Q3,” says the report, which also notes that beginning in the late summer/early fall of last year, many markets began to see corporate demand return, which “combined with improved group demand, has offset softer Q4 leisure demand levels. Overall, 2022 RevPAR has increased by 91 per cent over the previous year and is 3.5 per cent over year-end 2019 levels.”
“As we approach mid-2023, and this on the heels of the many challenges the tourism sector faced as a result of the pandemic, the outlook for the Canadian hospitality industry certainly appears brighter,” says Canada Hotels & Chains Report, an overview compiling a sample of more than 7,100 Canadian hotels and close to 450,000 guestrooms produced by Horwath HTL. “Already, year-end 2022 results saw the industry register a RevPAR of $109, or a result comparable to the results of 2018 and 2019.”
View from the top
Collectively, Hotelier’s Top 35 companies posted estimated gross sales of $14.5 billion for 2022, with our top three companies (Four Season Hotels and Resorts, Marriott Hotels of Canada and Accor Hotels North & Central America) accounting for an estimated $7.5 billion of that total.
Four Seasons Hotels and Resorts topped the Top 35 Report again this year with estimated gross sales of $3 billion, up from estimated gross sales of $2.4 billion in 2021.
“2022 marks an important moment in the evolution of Four Seasons as we sharpen our development focus in key markets, strengthen our leadership position as an iconic luxury brand and capitalize on new opportunities that will continue to drive and diversify our growth,” says the company’s 2022 Annual Report. “Realizing these opportunities means investing in our greatest competitive advantage — our people. For more than 60 years, the strength of Four Seasons has been grounded in our unmatched commitment to service excellence. As we grow with intention, so too do the opportunities for our people, ensuring we create an environment in which they can flourish.”
Marriott Hotels of Canada reported strong year-over-year growth with gross sales for 2022 coming in at $3 billion, up from $1.3 billion in 2021, good enough for second place in our Top 35 rankings.
“Our performance in 2022 was terrific. Just two years after experiencing the sharpest downturn in our company’s history, we reported record financial results,” says Anthony Capuano, Chief Executive Officer of Marriott International. “Our fee-driven, asset-light business model generated significant cash during the year, allowing us to both invest in the growth of our business and return $2.9 billion to shareholders. In our largest region, the U.S. and Canada, RevPAR increased five per cent over the 2019 quarter, driven by further improvement in occupancy and an 11-per-cent increase in ADR. Leisure demand remained robust and group demand more than fully recovered, leading to fourth-quarter group revenues 10 per cent above pre-pandemic levels. Business transient demand was at nearly 90 per cent recovery in the quarter, while ADR was three per cent above 2019. Our successful negotiation of high single-digit special corporate rate increases for 2023 bodes well for continued price strength.”
After two years severely impacted by the COVID crisis, Accor’s fiscal-year 2022 posted a solid and sustainable rebound in the group’s activity. The global brand reported sales of $1.4 billion across its 29 Canadian properties in this year’s Top 35 Report, up from $628 million in 2021, landing it in third place in this year’s report.
“The performance of hotels over the second half of the year surpasses pre-crisis levels in almost all our regions,” reads Accor’s 2022 Annual Report. “Only Asia, a region impacted by China’s strict zero-COVID policy until year end, is still significantly below 2019 activity levels.”
Worldwide, Accor’s recovery was primarily driven by domestic guests, with levels exceeding those of 2019, whereas international travellers failed to return to the level of 2019. As observed in recent quarters, the recovery was led by a strong increase in prices, fuelled by demand and accentuated by inflation.
In 2022, Accor opened 299 hotels, corresponding to 43,000 rooms, accounting in a net organic growth in the network of 3.2 per cent over the 12-month period. At the end of December 2022, the group had a hotel portfolio of 802,269 rooms (5,445 hotels) and a pipeline of 216,000 rooms (1,247 hotels).
“Tourism recovered substantially in 2022 and our performances, up strongly in all regions, reflected that rebound,” says Sébastien Bazin, Chairman and Chief Executive Officer of Accor in the company’s annual report. “We exceeded our financial and non-financial targets and can look to the future with serenity. Our brands are attractive, our distribution is powerful, our teams are talented and motivated, and our organization has been adapted to capture future growth even more effectively.”
He stated these strengths, combined with the genuine culture of the group — placing people and talents in the heart of its model — “give meaning to our action. In 2023, our ambition is to keep our growth and reinforce our leadership by continuing to evolve the codes of the hospitality industry and remain the chosen partner of our hotel owners and customers.”
Upward Trajectory
Combined estimated gross sales for our Top 35 companies this year totalled $14.5 billion, a massive leap from last year’s estimated gross sales total of $9.2 billion. In fact, all but a few of our ranked companies this year showed significant growth over 2021. According to STR, Canadian hotels achieved record-high rates and revenue per available room in 2022.
“Canada’s hotel industry showed exceptional recovery in 2022,” said Laura Baxter, CoStar Group’s director of Hospitality Analytics for Canada in a statement. “Not only did ADR and RevPAR return to pre-pandemic levels, which was much faster than originally anticipated, but both metrics also reached record highs.”
This progress was evident in the sales numbers submitted for this year’s report. Some companies of note include Marriott Hotels of Canada with a reported increase of $1.7 billion; InnVest Hotels with a $337-million increase (from $280 million to $617 million); and Best Western Hotels and Resorts (BW) with a $309-million increase over its 2021 results (from $470 million to $779 million).
Many smaller hotel companies also thrived in 2022, such as Alberta-based Basecamp Resorts, which grew its sales from $10 million in 2021 to $25.3 million at year-end 2022; Victoria, B.C.-based Accent Inns with an $11-million increase over 2021 ($29 million to $40 million); and New Castle Hotels and Resorts, which reported a $29-million increase over its 2021 results ($33 million to $62 million).
Looking Ahead
According to a recent Canadian Lodging Industry Overview: Hospitality & Gaming, most markets in Canada experienced accelerated ADR growth in 2022, which resulted in some markets seeing ADRs well above 2019 levels. Domestic leisure demand largely drove ADR gains over the last two years as travel outside Canada was restricted. With more travel options available and the high cost of travel and hotels in Canada, there is potential for some leisure demand to dissipate in 2023.
The report states that a return of regular group and corporate demand, which is usually lower rated, will have further impact on future rate growth, adding “dynamic pricing structures for negotiated rates are an opportunity for some hotels to increase rates in the coming year.”
Labour shortages and costs will continue to be issues for hotels as properties return to normal staffing levels. With the unemployment rate at just five per cent, the industry will face challenges in 2023. This past year, the Hotel Association of Canada, along with Tourism HR Canada and the Government of Canada, created the Destination Employment program. This bridge program helped mobilize 1,300 new Canadians into hotel jobs in five key regions of Canada in 2022. These groups continue to advocate for modifications to programs that will ease the labour shortage for the hospitality industry.
BY AMY BOSTOCK
