Since the Canadian hotel industry reached the trough of the current downturn in early April — with occupancy reaching a low of 12 per cent — performance has slowly eked upward while the industry continues to record steep year-over-year (YOY) declines.
The industry began reporting double-digit declines in occupancy the week of March 8 to 14 and saw weekly occupancies of 15 per cent or lower from March 28 through April 25, according to data from STR. And, by mid-June, the nation’s hotels were still shy of breaching the 25-per-cent occupancy mark.
The industry reported a 68-per-cent drop in occupancy to 23.4 per cent, a 49.8-per-cent decrease in Average Daily Rate (ADR) to $108.23 and an 80.7-per-cent decrease in Revenue Per Available Room (RevPAR) to $25.57 for the week ending June 13. This reflects steady, but small, weekly increases across the three metrics since the week ending April 11, which saw national occupancy at 12 per cent, ADR of $101.34 and RevPAR of $12.17.
“Things were pretty dire as group- travel, corporate-transient and leisure-transient demand came to an abrupt halt in April,” says Jan Freitag, STR’s SVP of Lodging Insights. “The data that we’re seeing now is, ‘less bad.’”
“The RevPAR changes we’re recording — in April, down 84.8 per cent; in May, down 82.9 per cent — are dire and point at a complete lack of corporate demand on the transient and the group side,” he adds, noting occupancies remain slightly overstated, as they don’t account for hotels that were completely closed (representing 11 per cent of rooms nationally in May).
Looking at results by hotel tier, high-end hotels remain the hardest hit, a trend Freitag says has been mirrored in many international markets and points directly to a lack of corporate demand. “Upper-upscale hotels both live and die by group demand and, with a lack of group demand, most properties are hit severely,” Freitag explains. “And, they really will not recover meaningfully until group travel resumes, which arguably is not going to happen until there’s a very clear sense of what is safe and how to have a group meeting in a six-foot world. Some even go as far as saying we need to have a vaccine in place in order for group travel to resume at 2019 levels.”
However, luxury hotels are now slightly out-performing upper-upscale, with occupancy at 13.5 per cent and 12.2 per cent, respectively, for the week ending June 13. According to STR data, this trend began in mid-May and is attributed to luxury resorts being able to attract travellers from domestic drive-to markets. “The other truth, of course, is that the ADR, [specifically for the week of June 13] was down 52 per cent on the luxury side,” says Freitag. “So, luxury rates in Canada are essentially half off, which probably also entices travellers.”
Overall, the rate gap between tiers has shrunk. Looking at STR data for the month of May, the difference in ADR between luxury and upper-upscale hotels was only $3.77 — down from $92.71 in May 2019. YOY declines in ADR are most pronounced at the luxury tier (54.5 per cent for May), with a drop of 37.1 per cent at the upper-upscale tier. And, at the other end of the spectrum, the midscale tier saw ADR declines of 20.6 per cent for the month.
Canada’s top major markets largely reported occupancy and RevPAR below the national average for the week ending June 13, with Vancouver (26.1 per cent and $32.74 respectively) being the only exception. At the low end, Calgary reported occupancy of 15 per cent and RevPAR of $15.12 for the week. “The larger markets have a disproportionate amount of the larger, upper-upscale hotels, explains Freitag. “Therefore, because of the overall lack of group rooms, those markets are lagging the overall Canadian performance — and likely will for a while.”