Early in 2021, expectations by industry analysts were that it would be a year of modest but positive recovery for the Canadian hotel industry as restrictions were lifted and demand from all segments gradually returned.
According to Avison Young’s Canada Hotel Market 2021 Review and 2022 Outlook, while monthly occupancy levels for 2021 in Canada were still not in line with 2019, they did show significant growth in 2021 compared with the struggles of 2020. In August 2021, the report showed, national occupancy levels reached 65.6 per cent — the highest since October 2019.
In December specifically, year-end data from STR showed Canada followed its typical seasonal trend with slightly lower performance than November, but the country did achieve better pre-pandemic comparisons. Occupancy was down 13.4 per cent to 42.6 per cent, ADR dropped 2.5 per cent to $149.85 and RevPAR fell 15.5 per cent to $63.87.
“Despite a surge in COVID cases toward the latter half of December, hotels in Canada benefited from leisure demand during the holiday weeks,” says Laura Baxter, CoStar Group’s director of hospitality analytics for Canada. “While the holiday demand was expected, overall performance was also helped by a lift in group demand, which rose to 70 per cent of the 2019 comparable —the closest the metric has been to that marker since the pandemic began.
She says when examining full-year performance, pent-up demand from the domestic market advanced performance over the summer, “signaling the start of a much stronger second half of the year. Against the backdrop of fluctuating demand patterns, though, hoteliers focused on what was within their control, which was how rates became the success story of the year. By Q4, monthly room rates reached 90 to 99 per cent of 2019 levels. Weekend rates were particularly strong, surpassing pre-pandemic levels in November and December, while weekday rates were not too far behind with only five to 10 percentage points to go.”
With very few exceptions, our Top 35 companies recorded growth in gross sales for the year ending 2021, signalling a change in the tides and cause for renewed hope as the country moved into post-pandemic recovery mode.
View from the top
Collectively, Hotelier’s Top 35 companies posted an estimated gross sales of $9.2 billion for 2021,with our top four companies (Four Seasons Hotels & Resorts, Marriott Hotels of Canada, Accor and Best Western Hotels & Resorts) accounting for $4.8 billion of that total.
Four Seasons Hotels & Resorts once again led the pack last year with an estimated $2.4 billion in sales globally for its 126 luxury properties.
“In a time of unprecedented change and challenge for our company and the entire hospitality industry, we continue to innovate, remaining flexible in our plans and nimble in our ability to capitalise on opportunities, while maintaining momentum towards our long-term goals,” said John Davison, president and CEO, Four Seasons Hotels and Resorts in a 2021 release. “The impacts of the pandemic continue, and we are tackling these issues as they come. Yet more than ever, we are confident in the long-term success of the company.”
Most recently, Four Seasons announced its expansion in Europe with a property in Italy’s southern region of Puglia. The company will also continue to expand its Spanish portfolio with a resort in Mallorca, as the brand will manage the historic Hotel Formentor, introducing it as a Four Seasons experience in 2023.
Marriott Hotels of Canada, meanwhile, landed in second spot on the Top 35 Report, reporting gross sales of $1.3 billion across its 262 Canadian properties (up from $967.7 in 2020). The company ended 2021 with cautious optimism for 2022. During an investment call held in February 2022, CEO Tony Capuano said the company finished the year “on a real high note,” with the Omicron variant having a “limited impact” on results in the fourth quarter.
Sitting in third position in this year’s Top 35 Report, Accor recorded a $166-million dollar increase over 2020, reporting gross sales of $628 million across its 29 Canadian properties for 2021.
“Despite a disrupted start of the year due to overall health restrictions, 2021 showed significant improvement in our business, as of the spring, with trends picking-up month after month right up to December,” says Sébastien Bazin, Chairman and Chief Executive Officer of Accor. “Our solid performances were achieved owing to the strength of our brands, our financial discipline and the sterling efforts of our teams who, throughout the year, demonstrated determination, tenacity and generosity. Thanks to their mobilization, we emerge stronger from this crisis and have gained market shares in all our key regions.”
During 2021, Accor opened 288 hotels, representing 41,000 rooms, resulting in a net growth in the network of three per cent over the 12-month period. Bazin adds Accor’s pipeline continues to flourish, with luxury and upscale segments representing close to 40 per cent of future openings, a 12-point increase in the past four years.
“As the desire to escape and to resume travelling has never been stronger, we are well underway to make the most of this rebound in all our markets.”
Best Western Hotels & Resorts recorded gross sales of $470 million in 2021 and added 25 Canadian properties to its portfolio, landing the company in fourth place on this year’s Top 35 Report.
In October 2021, then incoming president and CEO for Best Western Hotels Group, Lawrence (Larry) M. Cuculic, told Forbes that as the industry continues to recover, Best Western was planning to strengthen its loyalty program, work to increase brand revenue and drive development efforts across key markets in North America and across the globe.
“The balance sheet is stronger than ever thanks to the organization’s quick response implementing an aggressive austerity plan,” he says. “Best Western was able to provide over $65 million in financial relief to hotel owners over the past 18 months, and the brand is seeing both an increased ADR and occupancy due to the pent-up demand. In addition to the austerity plan, Best Western was among the first to roll out enhanced cleaning protocols and operational best practices during the pandemic.”
Meeting Challenges
Hotelier’s 2021 Investment Roundtable, sponsored by Marriott Hotels of Canada, was held last October and delivered a message of optimism for the Canadian hotel industry, but its participants were very candid about the challenges 2021 threw at them.
“The last year has been really hard. The hardest part is all the indecision because of the uncertainty,” said Anil Taneja, managing director, at Palm Holdings, which held steady in 2021 with recorded gross sales of $53 million across its 20 properties. “Do we build, or do we renovate, or do we not? Do we put everything on pause? And on a Monday, you can wake up with all this optimism and on Tuesday, you’re going to wake up and think, ‘oh my God, I’m crazy’ for what you thought yesterday and let’s put everything on hold. There was nothing we could do to figure out what the right answer was, and we’re still in that now. There are no right answers — you just have to make decisions based on your gut and potential optimism. The hardest thing we had to deal with is we lost some absolutely amazing people because we had no occupancy and that’s a trauma that still lives with us as an organization today.”
Roz Winegrad, AVP, Owner and Franchise Services, Marriott Hotels of Canada at Marriott International, said a lot of her time was spent with Marriott owners and franchisees, “providing whatever relief Marriott had been providing throughout the last bubble of 18 months and making sure the operations stayed afloat. We provided every bit of support from financial relief to tools, resources, marketing, sales and trying to stay as nimble as we can.”
“It’s been the perfect storm from every angle — nothing we ever thought we would see in our lifetime,” said Serge Primeau, president of Montreal-based Urgo Hotels, whose business grew by leaps and bounds in 2021, recording gross sales of $150 million, up from only $25 million in 2020. “It was a rollercoaster. Now we feel there might be light at the end of the tunnel, but we’re dealing with employee shortages so that’s another storm…and retaining and maintaining our talent pool has also been a big challenge over the time — we succeeded in doing so, but it required a lot of effort.”
Labour Pains
Primeau was not alone in the labour challenge as many hoteliers found themselves turning down business when occupancy levels started to rise in 2021 as staff shortages became a major issue.
According to Avison Young’s Canada Hotel Market 2021 Review and 2022 Outlook, pre-pandemic, the accommodation and foodservice sector accounted for 6.4 per cent of the Canadian labour force, but in 2021, this percentage fell to 5.1 per cent.
“Hotel owners report that staff either moved to other industries with more secure employment, or that it made more financial sense for some workers to continue collecting government aid,” the report states. “The public and private sectors must find ways to address the issue of staff shortages.” On December 17, 2021, the Minister of Employment, Workforce Development and Disability Inclusion announced up to $67 million in funding to support Canada’s tourism-and-hospitality sector through the Sectoral Initiatives Program (SIP). Budget 2021 committed $1.8 billion over three years through several new initiatives that could help create almost 500,000 new job and training opportunities for workers over the coming years.
Investing in the Future
According to Colliers Canada’s 2022 Canadian Hotel Investment Report, hotel transaction activity is back as pandemic-related uncertainty and travel restrictions ease. The report also states that new regulations and legislation will shape the investment landscape and decision-making process, but generally the relaxing of public-health and travel restrictions will help build confidence and provide a lift in operating performance.
“There is resilient pent-up demand for travel, particularly for leisure, and hybrid leisure/business travel, says the report. “We believe a robust rebound as spring approaches is inevitable, with the exception of larger full-service hotels, as group and convention travel demand is expected to lag in recovery. Larger urban hotels should rebound meaningfully over the next 12-plus months.”
By Amy Bostock
