TORONTO — Canada’s hotel industry is primed for a strong year — that was the consensus at this week’s Canadian Hotel Investment Conference (CHIC) held at the Westin Harbour Castle Hotel in Toronto. More than 500 industry executives and investors attended the annual conference.
Susie Grynol, president of the Ottawa-based Hotel Association of Canada (HAC), kicked off the day with an address in which she spoke of the need for the industry to work together to facilitate change. Grynol outlined the five key issues the hotel industry is facing today: disruption, labour, OTAs, Canadian competitiveness and the increasing costs of doing business. The HAC president said the association is building a 12-month strategy to target federal politicians to help them better understand the issues being faced by the industry. “We need a united voice when talking to all levels of government,” she said. Grynol also spoke of the need to raise the profile of entry-level workers and the importance of selling the notion of working in the industry to millennials.
In the first panel of the day titled “Ever Evolving Hotel Landscape,” a mix of pundits and operators outlined the operating environment faced by today’s hoteliers. According to Jean-Francois Perrault, economist from Scotiabank, “There’s a significant disconnect with what we see in the news and what’s happening on the ground.” Perrault painted a picture of a strong economy marked by rising consumer confidence and business indices that suggest firms are confident in the economy. “Despite rhetoric, there is an acceleration of trade and business is kicking into high gear,” said the economist. According to Perrault, North-American households are reasonably flush with cash.
Mark Woodworth, from CBRE Hotels’ Americas Research, painted a similar picture of the American economy, pointing to strong occupancy south of the border in cities such as New York, where occupancy numbers remain strong despite the growth of Airbnb. “It’s a good time to be in our business,” said Woodworth, adding the prospects are even better in Canada, where growth is going to be more stable. “There’s upside potential in those markets that have been devastated in the past three years.”
According to Jonathan Korol from SilverBirch Hotels & Resorts, “We’re optimistic buyers. We have capital to chase signature deals in Canada.” Asked to define where the industry is in terms of the cycle, Korol said “We will see the peak when we have a gross imbalance of supply and demand.” Ian McAuley of American Hotel Income Properties REIT stressed the importance of diversification, noting that when the resource market collapsed, the company’s other hotels in the portfolio still managed to post strong growth.
Scott Duff from CBRE Hotels and Carrie Russell from HVS offered up a cross-country perspective on hotel fundamentals. Overall, with the exception of declines in Alberta, which saw RevPAR drop by 10.2 per cent, most of the country experienced solid growth both in occupancy and dollar rates. In fact, RevPAR grew by five per cent across the country, with the highest growth registered in B.C. (11.5 per cent) and Ontario (10.8 per cent).
Most of the country is looking at minimal supply growth in 2017 except for Saskatchewan, which is expected to see supply growth of 5.7 per cent. On the flip side, in 2016, demand grew by 1.5 per cent. Already in the first quarter of 2017 demand is up by 3.4 per cent. That figure is expected to remain buoyant given Canada’s 150th birthday, Montreal’s 375th birthday as well as declining interest from Canadians to travel south of the border.
From a transactional point of view, a total of $1.8 billion exchanged ownership hands in 2016 (excluding strategic transactions, which represent $2.54 billion), with Ontario garnering the highest volume of that total at $1.1 billion, representing 86 per cent of that volume.
In breakout sessions held throughout the afternoon, a panel of operators from across the country examined the preference to build hotels or deal for them. Many of the operators on the panel stressed the importance of building in markets that you are familiar with. “It’s important to stick to what you know in your own backyard and keep it simple,” said Deepak Baring, Calmcrest Holdings. Steve Gupta, owner of the Easton’s Group of Hotels echoed the sentiment, adding it’s easier for him to build in Toronto because he’s based there. He added, however, that high barriers to entry, including the cost of land, are making it more challenging to build in some markets. At the end of the day, said Gupta, “I’m an entrepreneur, I take my money and my expertise where I can get the best return.”