TORONTO ─ Over the past year, the hotel industry has certainly been one of the hardest-hit industries due to COVID-19. But now a study by CBRE shows just how devastating that impact has been on Toronto hotels. The study, commissioned by the Greater Toronto Hotel Association (GTHA), examined the potential demand and revenue losses associated with COVID-19 restrictions on Canada’s largest city. The goal was to assess the potential losses on the city’s hotel sector and to better understand what is at risk if member hotels are unable to host large-scale meetings and events in 2021.
According to the report, there were only five city-wide events held in Toronto in 2020 representing an 89-per-cent decline from 2015, which saw 35 city-wide events. In terms of attendance, those events generated 54,900 people, whereas in 2015 there were 389,358 attendees, representing a decline of 82 per cent. In terms of occupied room nights, in 2020 the hotels registered 24,985 room nights compared to 159,000 in 2015 and direct spend dropped from $448 per attendee to $63 per attendee.
To put that into perspective, GTHA hotels generated 1.8 million M&E occupied room nights (ORN) in 2019 and 360,000 ORNs in 2020, representing a loss of 1.4 million M&E ORNs in 2020, an 80-per-cent decline.
Not surprisingly, there was a higher reliance on GTA business in 2020 as there was a significant loss in U.S. and international business, much of which is expected to continue into the near future.
With events for the future booked several years in advance, there is only one city-wide event on the books for 2021, representing 3,000 attendees and 4,500 room nights. In 2022, there are currently 12 events scheduled representing 60,300 attendees and 61,850 room nights. Interestingly, 350,000 M&E room nights were on the books as of January 2021, representing the equivalent to 2020 ORNs, of which 71 per cent have cancelled as of March 31, 2021.
Among other ramifications of COVID-19, lead times have become much shorter; clients did not sign contracts; not enough time was available to confirm major business for 2021; and clients took more of a wait-and-see approach. Sadly, many hotel banquet departments have been effectively closed through this period.
Historic results show that demand change declined by 63.9 per cent in 2020 compared to 2.2 in 2018; ADR dropped by 26.3 per cent in 2020 compared to growth of 6.3 per cent in 2018, while RevPAR dropped 73.3 per cent in 2020 compared to a growth of 7.2 per cent in 2018. Occupancy went from 75 per cent in 2017 to 27 per cent in 2020; ADR dropped from $177 in 2017 to $139 in 2020 while RevPAR went from $132 in 2017 to $37 in 2020.
The report also previews a couple of possible scenarios for the next five years, with projections showing occupancy to hit 73 per cent in 2026 with ADR of $188 – returning to the same levels achieved in 2019.