An influx of five-star luxury properties says this is not your average bear (market)

Throughout the decades, the Canadian hotel scene has been dotted with luxury hotel touchstones from coast to coast. Traditionally following the expansion of rail lines, iconic properties sprouted across the country and continue to thrive in locations such as Lake Louise, Winnipeg, Ottawa and Quebec City. With names like Laurier, Frontenac and Elizabeth, they speak both to the nation’s political history and to our tradition of world-class hospitality.

But something funny happened on the way to the old Canadian Pacific Chateau. There’s been a zeitgeist change and, as a result, tomorrow’s luxury traveller will experience a world quite unlike that of his steam-engine forefathers. He’ll share his hotel not only with other travellers, but with condominium owners; his hotel’s restaurant will not be a last epicurean resort, but a thriving downtown hotspot owned by an international celebrity chef — a recent phenomena in itself — and in major Canadian centres like Toronto, he’ll choose from a never-before-imagined  number of five-star options.

This development, however, might seem counterintuitive to those simply interested in the research numbers for the high-end market in Canada. According to Brian Stanford, director at Toronto-based PKF Consulting, the upscale segment and the overall market in Toronto’s downtown core were among the recession’s worst performers. While he sees some significant opportunity in terms of newer luxury properties helping to tourniquet rate integrity, those benefits are as of now, theoretical. “What we’ve seen in the past is that, traditionally, the upscale market has outperformed the overall industry by about two or three points in occupancy, and by about $30 in terms of rate,” Stanford says.  “However, this past year, while all market segments were off by about five points on occupancy and the industry was down about six dollars in terms of ADR, the upscale segment was off $13.”

In a separate study, Stanford points to a more acute problem for the downtown Toronto market where a five-star building boom is in progress. Shangri-La, Trump Hotels, The Four Seasons, Thompson and Ritz-Carlton are all slated to open spanking new properties by 2012. In that particular market, occupancy is off by about six per cent, and ADR is off by $20, with Stanford noting that, anecdotally, the upscale market has fared even worse in that area. “In reality, as much as we’ve seen some rate discounting across the country, there has been a lot more of it in the downtown Toronto upscale market.”

Despite the doom and gloom numbers, the best thing about living in the trough of a recession is that there is no place to go but up. That appears to be the attitude of the developers currently busy in the brick-and-mortar phases of several marquee luxury properties.
“Toronto is an international destination, and Trump as a brand only focuses on internationally recognized locations,” says Jim Petrus, COO of the Trump Hotel Collection, which is currently in the middle of building its first Canadian property, scheduled for completion in early 2011. “We’re very bullish on the opportunity for the brand’s footprint in the city. Obviously the global economy has taken a different turn, but there is always going to be demand in the longer term. We’ve gone through a bit of a bump in the road right now, but our view is for the long-haul,” he adds.

Taking the long view is something that can be forgotten in the crisis of the moment, but it’s clearly something our hostelry grandfathers did when they constructed sprawling projects like the Royal York and the Banff Springs. Thankfully, it’s not an entirely forgotten tradition today, despite a trying economic cycle. “Our new Toronto project is full-steam ahead. In fact, it’s ahead of schedule,” says Susan Helstab, executive vice-president of Marketing for Four Seasons Resorts, about the new-build project scheduled for a late 2011, early 2012 opening. “It’s a lousy time for there to be so much five-star supply in the city, so it’s going to be tough for everyone to compete. But you don’t build hotels just for today. We’re very hopeful by the time we open our doors in 2012 the economy will look differently. And, while we don’t expect a really quick bounce back, we’re confident over the next two years we’ll get back to something more familiar,” she adds.

One significant reason for Helstab’s confidence is what she sees as a mountain of travel intentions sitting on the sidelines. “The confidence of the affluent traveller is heavily tied to the stock market,” she says. “So we’ve seen a decrease in travel over the last 12 months but started to see some stabilization in the markets recently. In fact, we just finished some focus groups, because we wanted to see if there was a more permanent shift in attitude.”

And what did those focus groups find? “There was no real sense of permanence to the new frugality,” she says. “In fact, we think there is a lot of pent-up demand for travel, particularly on the leisure side of the business.”

The key to success in these, and even better economic times, according to several upscale property insiders, is being ready to offer guests everything they need, including the things they don’t even know they need. “Despite a down economy, the luxury traveller is still relevant,” says Tim Terceira, GM of the Ritz-Carlton Toronto, which is currently under construction and slated to open in the summer of 2010. “If you look at the bandwidth of any segment, you’ll see customers at the edges within that market segment, but there are still customers who thrive on a hotel experience, both from a business and leisure perspective,” he says.

According to Terceira, success comes from a long-standing commitment to the brand’s ideals. “A brand is really a promise, and it’s what our customers around the world have come to expect from us,” he says. “It means rain showers, soaker tubs, HD TVs built into bathroom mirrors and 400-thread-count sheets. It basically means everything they have at home, but in a fresher environment every day.”

As for service, it goes without saying that anything less than the best simply doesn’t cut it, particularly when today’s luxury clientele, despite being wealthy, are still looking for a certain value proposition. “The service we provide is integral to the experience,” says Terceira. “We work hard to fulfill the unexpressed needs of our guests, which allows them to be at their peak performance,” he says.
Value is a word echoed by the Four Seasons’ Helstab. “Value is a combination of quality and price, and by that definition we’ve always provided exceptional value,” she says. “The greatest value is allowing guests to make the most of their time. We work to ensure that we’re able to provide all of the services required, so that guests can accomplish the purpose of their trip and that goes for both business and leisure.”

Finally, despite the increased competition at the high end of the Canadian market, and in the Toronto scene in particular, most industry professionals seem confident that the economy is strong enough, and the offerings are remarkable enough to support the added supply. “In many ways, the added competition means there are a lot of people that believe in the destination,” says Trump’s Petrus. “Our location on Bay Street is sensational, and we feel as though the Trump brand name will complement the market very well.”

Complementing a city and its residents has been a major component of service at The Four Seasons Toronto, and Helstab sees that only increasing when the new property is unveiled. “We’re fortunate in many respects,” she starts. “We’re an important part of lives in Canada, from weddings to Bar Mitzvahs and Bat Mitzvahs or any other special occasion. The Toronto property has been an integral part of many lives, and that connection transcends the physical building.”

Canada’s luxury hotel market has transcended time and geography, but whether the new breed of luxury can transcend a difficult economic climate remains to be seen. Despite some uncertainty, one thing is clear, Canada’s five-star neigbourhood, is about to get more crowded.

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