By Amy Bostock & Rosanna Caira
TORONTO — CHIC Digital 2020, produced by Big Picture Conferences, kicked off Day 2 of its virtual conference with Risky Business — A noted Canadian pollster and economist share all! presented by Nik Nanos of Nanos Research Group of Companies and Dawn Desjardins of RBC Royal Bank.
“We’re in the midst of the worst economic downturn since the Great Depression,” said Desjardins, explaining that the Canadian economy contracted by 13 per cent over the first half of the year when COVID forced a complete lockdown. “That was a short period of time ─ six weeks of a complete shutdown but it totally decimated the economy,” she said. “It put us on our back foot.” As the economy started to re-open, Desjardins said, “We did see a significant re-bound in economic activity, which means, when the year ends, we’re going to see a reported growth rate of 4.8 per cent in annualized rate. As we move through the fall and experience a resurgence in infections, this definitely dampens the momentum for Canada’s economy. As we round out 2020, we’re looking for marginal, if any, growth in the final quarter of the year. What this is telling us is the economy probably contracted by 5.5 per cent in 2020.” Desjardins did offer optimism, noting that the announcement that two vaccines have been discovered in recent weeks suggests “we will see a better year for 2021.”
Still, as Desjardins stressed, “Recovery is not around the corner. It means we’ll move quite gently into 2021. “As we get through the middle of the year, we do anticipate quite robust gains and this gains will generate growth of about 4.5 per cent ─ that most likely get us back to where we were before we entered the crisis.” The RBC economist pointed out that it will be an uneven period of time with big increases followed by weaker quarters of growth. “We’ve seen unevenness and choppiness even when we look at it on an industry basis,” pointed out Desjardins, adding that when we do see economic recovery, it will be uneven and choppy. She stressed that some areas of the economy have grown,” citing online retail sales pick up at a greater pace than they were a year ago.”
The economy will continue to show big holes, says Desjardins, citing construction, oil and gas, manufacturing as well as the service industry as areas of concern. “That will persist until we get the vaccine widely distributed throughout the Canadian population. When we look to 2021, there will be some growth ─ 4.5 per cent. “But the service sector will remain under pressure even as we go through in 2021. Recovery will likely take longer into 2022.” Adding fuel to the fire, the labour market has seen three million jobs cut in the first weeks of the pandemic, but in March and April, 2.4 million of those jobs were recovered, with the bulk of those losses in service industry.
While Desjardins provided the statistical side of the story, Nanos provided the context for the changes, reflecting the Bloomberg/Nanos Canadian Competence Index his company measures weekly. According to the research analyst, four out of 10 Canadians ranked the Coronavirus as the top-ranking issue in the country. “When we looked at the trendline, in March there was a spike in the concern, and then it kind of subsided,” says Nanos, but, he adds, with the second wave, “We don’t know what the full risk of the second wave will be.”
On the consumer side, Nanos says, when it comes to assessing how long it will take to get the economy back to normal, Canadians remain quite pessimistic, with most saying they expect recovery will take a least two years. “There’s lots of talk and chatter about vaccinations but for many Canadians, the hope is that vaccinations will create a stable environment for their personal lives, for the economy…” but in terms of when the country will get back on the road to recovery, he says consumers think by 2021 we will be on the path to normal with full normal perhaps in 2022.
The question, says Nanos, is “what happens once the spigot is turned off next summer,” and Canadians are no longer receiving government assistance. “Canadians are sputtering in neutral. They’re in a bit of a holding pattern,” they don’t know how it will be once support is done, and as a result, there’s still a significant level of uncertainty. Nanos compared more recent downturns, such as the recession of 2008, saying it was more of a psychological event comparing it to this downturn, which means the recovery for this downturn will take longer. “This is very different from 2008, which had a quick rebound and had no hit on the pocketbook.”
In terms of real estate, Nanos says, “it’s been the one outlier in all this. Back in March they were nervous Nellies” who wondered how real estate would be negatively impacted “but real estate has been one of the real bright lights,” he says. Buying and selling and activities have been strong. “More and more Canadians working from home are re-evaluating where they live,” explains Nanos. Some of the questions they’re asking are ‘Do I have the amount of space I need for my family and to reconcile home and work, and ‘can telework be part of the mix?’ Ultimately, that means Canadians are optimistic about real estate. “The key takeaways summarized Nanos, are uncertainty about the future and what does the second wave mean with the one bright part on the residential real estate front. “I don’t think any of us could have predicted back in March that we would have strong real-estate numbers that we have right now.” Although Desjardins did add, there is a weakness on the condos side, where people are shifting from condo to single detached homes, and also outside the city.
Desjardins also added that the results of the American election with its focus on a “Buy-American” philosophy and policy may further impact Canada, especially the Albertan economy. “We will see some impact on some parts of our economy from policy changes south of the border,” said Desjardins. And, finally, on the travel side, global restrictions mean more Canadians are apt to travel at home.
Next, Sylvia Occhiuzzi, VP, Beechwood Real Estate Advisors, led a Roundtable Discussion about post-pandemic changes to meetings, conferences and events.
“It’s an obvious statement, but the COVID-19 pandemic has had a swift and significant impact on all hotels, but [especially on] the full-service hotels and the ones that have meeting-and-conference business as a significant revenue generator,” said Occhiuzzi. “Some of those operations closed down and are starting to slowly re-open, while others have remained open and are working to generate revenue as best they can.”
The interactive Zoom session was open to all CHIC Digital attendees, who were invited to share their challenges and ideas to keeping meeting and conference business alive.
Next on the program was The Brand Wagon — Determining Capital and Operating Standards in Trying Times. Moderated by Roz Winegrad of Marriott Hotels of Canada, the panel — Irwin Prince of Realstar Hospitality, Serge Primeau from Urgo Hotels Canada and Accor’s Sara Glenn — discussed how to determine what the right amount of capital to spend is during quiet operating periods and what to do to maintain guest-service levels while trying to get to breakeven. The session also addressed the notion of “COVID fatigue” and what hotel companies are doing to combat it.
“I think we’ve said it a number of times, unfortunately, over the last several months, but we’ve never been so busy losing money and it’s not really what we’re wired to do,” said Glenn. “To use a worn-out phrase, it’s been a trying time and one thing we’ve realized is that COVID-19 isn’t a sprint, it’s a marathon. And unfortunately, a marathon with no clear finish line. And that’s, I think, where the kind of challenges get amplified. COVID fatigue is a very real thing for all stakeholders in this industry. It’s highly psychological stress associated with job insecurity, the increased workload with limited resources — be those resources, cash or people gaps — and then layer on top of that the risk of exposure to yourself, your family, your friends.”
She added it’s all about change and being able to manage that change while pivoting and innovating in a landscape that’s constantly changing. “One of the things we’re finding is a way to combat fatigue is to try and remind yourself of your clear purpose and create that positive environment, both for yourself, personally and professionally for your teams.”
From Hotel to Annuity — Explore Smart Conversion Strategies from Traditional to Unconventional brought a much-needed positive spin to the challenges of operating a hotel during COVID-19 and beyone. Greg Kwong of CBRE Limited was joined by Vincent Dods of Gibbs Gage Architects and Anil Taneja from Palm Holdings to discuss alternate uses for hotel properties — from affordable housing, seniors and student accommodation or rental apartments to hospitals and UberEats locations.
Taneja presented a number of innovative examples of conversion properties in the Palm portfolio that came about as a result of the impact of COVID-19 on communities.
“Like many of you were faced with the big challenge of how do we get our hotels to maintain cash flow — or how do we get them stop taking losses,” he said. “We’ve had many failures since COVID-19 started — more failures than successes as an organization. But we’ve focused on trying everything and anything in this environment.”
This included converting several of Palm’s hotel restaurants into Uber-Eats locations and ghost kitchens, converting hotels to shelter business, renting out hotel gyms or pools to trainers and converting a Montreal hotel temporarily into a hospital.
Afternoon Roundtable Discussions included Operating Hotels Today: Leaner and More Streamlined? and Capital Investment & Deployment: What, Where & When? both moderated by Nicole Nguyen, director, CBRE.
The day wrapped up with The Matrix — Experienced Capital Alternatives Are Right This Waymoderated by Alam Pirani from Colliers Hotels. Joined by Ash Lawrence of Brookfield Property Group, Paresh Raja from Brock Hotels and Doug Podd of Slate Asset Management, Pirani led a discussion around how to determine what the right capital source is for your short and long-term needs — are you looking for a partner or lender or both or is an outright sale a necessary consideration?
See Hotelier’s coverage from day one of CHIC Digital 2020 here