Earlier this year, Colliers Hotels hosted its first webinar on the state of the Canadian hotel market in order to provide support and direction as the industry began dealing with the effects of COVID-19. On June 25 — 90 days later — Colliers again hosted the original panel to account for and substantiate the statements and predictions they made on March 31.

Moderated by Alam Pirani, executive managing director, Colliers Hotels, the panel once again included Brian Flood, vice-president & practice leader, Hospitality & Gaming Group, Cushman & Wakefield; Carrie Russell, senior managing partner, HVS Canada; Deepak Ruparell, chairman, Silver Hotel Group; George Kosziwka, Chief Financial Officer, InnVest Hotels; Kenny Gibson, president, Sunray Group; and Mark Kay, president, CFO Capital. “Three weeks after the World Health Organization declared COVID-19 a pandemic and we started seeing the shutdown of economies globally, we had limited clarity on how severe the issue was and how long we would be shut down,” said Pirani. “What’s transpired since that time has been beyond everyone’s initial expectation. The restrictions on business activity and travel have caused a tremendous impact across all market industries — especially in the hospitality business. The drop in occupancy has imposed unprecedented challenges, not only to hotel owners and operators, but also to investors and lenders.”

The panel addressed three broad themes — real-time performance and market outlook; liquidity; and a look into the capital markets to address valuation in investor sentiment and availability of capital.

“It’s 90 days later and the first thing we can say is we survived,” said Russell. “I’m not sure too many of us would want to have repeated those 90 days, but we’re here today. [At the time of] the original call on March 31, we weren’t at the bottom. We hit bottom the week of April 11 — that was the worst week we have on record for Canadian occupancy, which was 12 per cent occupancy for that week for the hotels that were operational. And according to STR, close to 20 per cent of the rooms in the country were shut down. ADR bottomed out at about $101, down from $155 in early March. So, we went from a $155 rate to a $101 rate and stayed at that rate for about seven weeks. Now we’ve had a turnaround. We’re about 10 weeks into a recovery and last week occupancy was 25.6 per cent for the country with an ADR of almost $111. We’re still off in terms of RevPAR by almost 79 per cent, but that’s down from the decline of our lowest RevPAR decreases, so we’re moving back into a positive direction.”

She pointed out that no province was spared and no region was immune to this downturn. The performance and the numbers in B.C. were a little bit higher than the averages, while Newfoundland ended up being at the bottom in terms of overall performance. “But really, we’re talking about a difference between 10- and 20-per-cent occupancy. So, nobody was operating at levels that were profitable or productive.”

But, she added, the question remains, “how long until we start to see some of the other forms of travel and convention business/ business travel that makeup of base of what we’re doing? ”

Given that we’re starting to see some of the markets open up, Pirani asked the owners on the panel what they’re seeing with their current portfolio and how they see the recovery process unfolding.

“We see a little bit more traction in our limited-service hotels and secondary and tertiary markets,” said Gibson. “So, while we’re not setting the world on fire, we see a little bit of demand pick up in those hotels, where we thought we would see additional traction and we haven’t gotten it so far is in our [two] resorts. Once the province started opening additional services, our other business really picked up — golf, spa and our winery business. But we haven’t seen the traction in the rooms business yet. It’s coming. Our view is that the recovery is going to be a little bit protracted and the real question is how long will it go? Generally, we’re seeing signs of more booking pace into next year, certainly not this year.

According to Ruparell, Silver Hotels’ properties in Vancouver are running at just seven-per-cent occupancy right now. “We’re getting spikes on the weekend. Calgary is a disaster with not just COVID-19 but with oil and gas [challenges as well].”

He said it’s going to be a prolonged recovery. “What we know today and what we should be doing going forward is a different subject. But I think until the borders open up and the customers, corporate customers, are back travelling, leisure will do reasonably well in some locations.”

Kosziwka said InnVest Hotels’ limited-service portfolio, which includes more than 81 hotels, has shown the best performance but is “still not stellar.”

“In April and May we closed 25 of our hotels — mostly city- centre, group and conference-centric hotels. We’ve opened 12 of those hotels back up now and are scheduled to open the rest of them by the beginning of August, except for the Hilton Quebec City, which is under a major renovation and not scheduled to open until January 2021. Our occupancy for hotels that were open in April was 20 per cent and we’re tracking to do 30 [per cent] in June.”

He says although occupancy is low, his company is focusing on recovery, appropriate staffing and getting people back to work. “We’re hoping for a bit of a spike in July and August as people get out and do some leisure travel, certainly we’re not going to see any business from the U.S. or international business over the summer. But hopefully Canadians get out and travel and we can have a reasonable July and August.”

Not long into the webinar, Pirani addressed “the elephant in the room,” as he asked Kay to address the topic of liquidity.

“Lenders have been very supportive for the first three months,” Kay said. “Some have given us an additional three-month extension — some lenders have given six months. But there’s uncertainty [around] what’s going to happen post-six months [with regard to] the principal and interest deferrals, but also the debt, the debt-service coverage and covenants. The cries that we hear right now are that they’re at the mercy of the provincial governments and lifting the travel bans and quarantine period, coupled with the timing of the vaccine, in order to simulate the travel. When all that’s in the mix, then we’re going to have a direct correlation to the revenues. But what we’re hearing is that there should be some kind of direct correlation that when everything opens up, there should be no further support on the principal and interest aspect of it in order to assess the risk of the hotel.”

There were some heated discussions around government support and whether the panel believed governments, both provincial and federal, are doing enough to help the industry. But, as the clock ticked down on the webinar, Kosziwka pointed out the opportunities that can be found during this challenging time.

“It’s the right time to try to redefine the operating model,” he said, “to find efficiencies. Labour is our biggest expense by far and this is the time to look at a new model and be more efficient as part of a recovery plan. It’s important to try to help the margins any way we can, as business slowly comes back in. [When it comes to] ramping up and bringing people back, you only have one chance to do it and do it right. It’s going to be a logistical exercise.”

There’s no question [hotel] values have dropped due to the drop in short-term cash flow but, said Kosziwka, “I just want to make the point that it’s temporary, this business is going to come back. This is a health crisis first and an economic crisis second. Business will come back — whether it takes a year, 18 months or 24 months — and the values will follow.”

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