While 2011 wasn’t the worst of times, it wasn’t the best of times, either. It was a kind of non-descript year — a clever student who performed admirably, but never quite reached his potential.

Feeding on the glimmers of an uptick, which the industry began to feel in the last quarter of 2010, the dawn of 2011 was met with high hopes. The economy was rebounding, and operational contractions in the latter part of the first decade of the new century were being cautiously eased. In the end, 2011 was a mixed bag, meeting expectations on the revenue front but failing to nudge rates up to a healthier level. The continued recovery, which industry watchers had predicted on the demand side, failed to materialize. And, while 2011 saw modest gains in profit, the bottom-line growth rates of five per cent and six per cent industry analysts predicted, fell flat. Not surprisingly, growth was minimal. In fact, according to Hotelier’s Top 50 Report industry sales rang in at $17.0 billion, up 5.5 per cent from last year’s $16.1 billion.


“The year didn’t end as strong as we’d hoped it would,” says Brian Stanford, director at Toronto-based PKF Consulting. The reality check was due to many factors; the most significant being the failure of the industry to achieve better performance on ADR. Coming off a stretch artificially inflated by the Olympics, the hotel business in the West had no option but to contract. Central and Atlantic Canada, meanwhile, experienced an at-or-above inflationary impact and finished the year with no more than a one-per-cent rate spike. Nationally, rates fell by about one per cent. And, while demand levels are stronger today than they were in advance of the economic downturn, the industry has struggled to get its pricing back.

Consumers and operators bear equal responsibility for this state of affairs. In the larger markets, customers are resistant to the whiff of rising rates. And there continues to be a lack of confidence among operators with regard to demanding higher prices. “It’s a mindset,” says Stanford. “There were concerns from the industry’s perspective that the demand levels weren’t going to be in place. So even when the demand was there, [operators] were hesitant to make a move.”

RevPAR, meanwhile, climbed by just 1.5 per cent last year, failing to meet expectations that put it closer to four per cent. As this measure is purely a function of occupancy and ADR it highlighted the truth: last year’s flagging RevPAR was all about rate.

“The challenge of 2011 has been one of rate,” confirms Gopal Rao, vice-president of Sales and Marketing, IHG, Canada. As an industry, he says, this element is still very much in recovery. But he’s hopeful. “Rates always lag occupancy in our business. We know it will happen — it’s just that we’d have liked for it to have happened sooner.”


The 2011 recovery story has been largely predicated on occupancy. For many existing hotels, enhanced occupancy was the direct result of constrained supply. In stronger economic times, a two-per-cent to 2.5- per-cent expansion in supply is a reasonable expectation. But the Canadian hotel scene has been relatively muted on this metric lately. And 2011 was no different, tracking just 1.5 per cent. It’s about where the economic performance of the industry sits today, says Stanford, who predicts a one-per-cent supply hike for 2012. “With bottom lines not recovering, the economic viability of projects is tougher, too, and so you don’t see as much supply,” he says. “And banks, with existing hotels on the balance sheet that aren’t performing as well as before, are more cautious [about] lending to new development.”

But Stanford is less concerned about the shrinking supply levels. It’s where we are in the cycle, he shrugs. Lenders and developers are slowing down the level of new product coming into the market — and that’s a good thing. “We’ve come through some erosion in performance, so letting the supply-demand balance catch up is a very positive development.” Rao agrees the anticipated shift will spawn other consequences. “When demand grows and supply doesn’t grow at the same pace, rates will eventually rise.”


Despite the challenges, several operators posted impressive numbers and introduced long lists of thoughtful service improvements, thereby commanding Hotelier’s Top 50 Report. The Four Seasons, with 86 units and estimated sales of $4 billion in 2011 sales — helmed by Katie Taylor, president and CEO — was the top performer. It introduced a 15-minute room-service menu, added a resort in Morocco and opened new units in the U.S., including Baltimore. The company is poised to launch its highly anticipated Toronto property this fall. The 55-storey Yorkville property, and its 259 five-star guest-rooms (including 42 luxury suites) is highly anticipated.

Fairmont Hotels and Resorts placed second on the report, with sales estimated at $3.5 billion. In 2011, the company unveiled ambitious plans to increase the portfolio by 50 per cent through 2016 (largely outside of the North American market). “We saw a rebound in 2011,” says Mike Taylor, director of Public Relations at Fairmont. The leisure side of the market had long been healthy, he says, but business travel — a key segment for Fairmont — spiked 8.1 per cent in volume last year. Taylor points to particular improvements in programming to explain Fairmont’s progress. Baby boomers and their disposable income means they’re able to travel and keen to sustain an active, healthy lifestyle away from home. The Fairmont Fit program, which provides loyalty members with workout garb and complimentary BMW bicycles reflects that trend. And, last year, the company also rolled out an extension of its lifestyle cuisine program, which is focused on sustainable fresh ingredients and offers customized menus. Guests can now modify their dining needs according to dietary and health-related considerations, such as veganism, gluten intolerance and macrobiotic preferences.

At number three, Westmont’s sales slipped from $1.4 billion to $900 million last year, but the company shed several presumably non-performing properties, so the truth likely belies appearances. Meanwhile, Starwood enjoyed record growth worldwide last year, swelling from $869 million to $877 million. In Canada, it added two new hotels and opened its 60th unit (Sheraton Red Deer). It finished in the top five on the report for the first time, growing from $673 million to $698 million with 160 properties.

IHG, which made a choice to beef up its sales force by 25 per cent in the thick of the downturn, also had a fairly stellar year, with Canadian sales of $678 million, up from $673 million in 2010. Not insignificantly, it also re-launched more than 3,200 Holiday Inns globally.

And the list goes on. Best Western unveiled its “descriptors program,” giving it new segments to highlight; Choice opened 17 new hotels in 2011, including five new-build properties; and Sandman Inns acquired Sutton Place Hotels, inviting curious onlookers to regard the future for the once small company, with properties at the lower end of the scale, now scratching out new turf in the mid-luxury arena.


When it comes to technology, many of the leaders are striving to be responsive to guests’ increased expectations. For example, Fairmont’s corporate website now displays multilingual content to support growth in new markets; a newly released app allows customers to check in and browse rates from their mobile devices; and online check-in streamlines guest service. “But high-speed Internet and wireless access continue to be the top technology demand,” says Taylor. That’s why every Fairmont destination worldwide provides guests free high-speed Internet in their room.

IHG credits healthy business travel for a successful year. IHG’s Rao says the uncertain global economy notwithstanding, there really hasn’t been a slowdown of corporate travel within the Americas. He dismisses naysayers who suggest high unemployment rates tell a different story, pointing out that business travel wouldn’t include the type of people who are unemployed.


With the year half over, predictions for 2012 remain cautiously optimistic. Certainly the first quarter has seen strong performance on a range of measures. In Western Canada, where growth has been better than in other parts of the country thanks to the resource sector in Saskatchewan and Alberta, rates were up three per cent by the end of April, and demand levels are trending in excess of that. And, while Atlantic Canada is still struggling, Central Canada has seen a two-per-cent increase in rate and a one-point surge — approximately — in occupancy in the same period, explains Stanford. He predicts demand will rise by about 2.5 per cent in 2012, and rates will follow at least on a national level, at the same pace. If the industry can pull that off, he says, occupancy should grow by one per cent in 2012, and RevPAR will increase in the range of four per cent. The industry’s bottom line, Stanford forecasts, will grow by about six per cent, nationally.

Supply levels should signal the upswing portion of the cycle, predicts Rao. “Right now, the market is awash with money and is really in the mood for finding good deals,” he says. “There’s no question the economic chaos in Europe poses a threat to our business,” says Scott Allison, vice-president of Canadian Operations for Marriott Hotels of Canada, whose firm is on track to open six to 10 new units in 2012. “If things continue as they’ve been over the last little while, we’ll see continued growth in the hotel industry.”

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