Hoteliers around the globe struggle to put heads in beds during this worldwide recession
As the global economy continues its downward spiral, Canadian hoteliers are creatively looking for ways to keep their businesses afloat, all the while wondering what the future will bode for hotel development in the GreatWhite North.
Seasoned hoteliers understand recessions are part of the economic cycle. In the past three decades, for example, the industry has battled through three major downturns, in addition to the fallouts from 9/11 and SARS. But even hoteliers accustomed to market gyrations admit this downturn is unprecedented, with many stressing it could be volatile for years to come. “For the past 30 to 40 years we’ve had leaders who worked hard to make this a global economy,” says Kevin Frid, executive vice-president, Operations, Fairmont Raffles Hotels International in Toronto. “Well, be careful what you wish for.”While a global economy is efficient and synergistic, Frid says in today’s shrinking world, when one of the big markets goes down — whether it’s the U.S., Europe or Asia—everyone feels the impact.
Despite the financial calamity of recent months, Canada has fared well — better, in fact, than many other countries. “We didn’t do too badly in 2008 compared to the U.S.” says Frid. “Occupancy slipped a bit but rate was up,” he continues, adding, wryly, “When you’re going to get hit by a two-by-four, you want to at least put your hands up to protect yourself.”
Sean Shannon, regional vice-president, Full-Service Hotels at Carlson Hospitality agrees. “As far as specific performance, Canada is outpacing the U.S. in RevPAR by more than 28 per cent,” he says. “[And] the inbound international traveller still views Toronto and Vancouver as viable markets for business and leisure travel.” Shannon adds that U.S. travellers are now becoming accustomed to the passport restrictions, which will be less of an obstacle for inbound travel into Canada.
Still, hoteliers like Fairmont’s Frid — who has worked in both the States and Canada — believe that in comparison to the huge economic engines out there, Canada is a follower not a leader. Frid estimates Canada’s downturn is about 12 months behind the one that’s walloping the U.S. “Most agree you’re looking at U-shaped recession not a Vshaped one. You’re not going to go to the bottom and then bounce right back up, but certainly the bottom has not been hit yet.”
While no one can predict when it will bottom out, Shannon cautions operators not to take their eyes off the ball. “Although the Canadian market has been stronger in overall performance than the U.S., there still has been a decline in RevPAR during 2008.” He stresses that service can’t be compromised, even if you have to make cutbacks to labour. “Some of the focus on hotel performance has suffered as operators adjusted service levels.”
Though Carlson experienced fluctuations across Canada, its Radisson brand ended the year with a five-per-cent improvement in RevPAR.
Looking ahead, Canadian hoteliers acknowledge it’s going to a tough summer season, especially for resort destinations dependent on international and U.S. travel. “It’s about planning for the worst and hoping for the best,” says Frid.
With reduced in-bound travel on the horizon, the only certainty is the need to cut costs. “I see us planning more on the costs side,” says Frid. “You have to reverse your thought process — normally you expect to be busy and plan for down periods; now you expect to not be busy and plan for the up side.”
As for future development, Fairmont is on track to open its only new property in Canada late in 2009 — the Pacific Rim hotel in Vancouver. “Canadian development is not a large focus for us. We’re already in the major centres.” But the company expects to open eight new hotels in international markets this year, including exotic locales likeMacau andMecca. “We’re opportunistic, working with developers to bring hotels to where they want us — in the Middle East, Asia, Europe, and in the U.S.”
With a strong presence of 40 hotels across the country, Carlson has several new projects scheduled to open, including a full-service Radisson in Toronto. Shannon remains optimistic about Carlson’s pipeline. “Right now is the time to obtain funding to build as the current cycle will subside and the industry will begin to rebound.”
Looking to the future, Frid believes one of the country’s biggest challenges is the Canadian dollar, as well as where the country fits in as a tourist destination. “Canada continues to have a fractured approach to tourism at the government level,” says Frid. “They can’t make up their minds as to whether they love us or hate us, and they should love us because we generate so much revenue.” He says the perception is that Canada is a nice place to go, but it’s just that. “People don’t jump up and down wanting to come here, but they should, because we have so much to offer.”
With the world now more connected than ever, the hotel industry needs to be agile, reinventing itself regularly. “The environment we live in now is fluid; it’s ever changing and you constantly have to be able to adapt to it or you’ll fail,” warns Frid. But if the economic downturns of the past have taught hoteliers anything it’s the importance of remaining focused and calm. The tide will turn eventually. “And when it does, corporate travel will bounce back,” says Shannon. “It will allow us to gain back the consumer who may have had budget restrictions during 2008 or 2009. And as the economic upheaval subsides, travellers will shift back into old patterns. We won’t see the record performances of 2006 and 2007, but we can expect to see gains leading to higher demand by 2010, resulting in increased opportunities for supply.”