TORONTO—While Canada’s stable financial system may insulate the country’s hotel industry from the harshest effects of the global economic meltdown, hoteliers won’t escape unharmed.
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| Economist Warren Jestin (left) presents while David Larone (right) waits to share his 2009 outlook during the opening session at the Hotel Association of Canada’s 17th Annual Conference. |
That’s what two of the industry’s leading economic and performance experts concluded during the opening session at the Hotel Association of Canada’s 17th Annual Conference at the Hilton Toronto last week.
“The good news is that Canada doesn’t have that type of leverage (as the U.S.). Our banking system is rated as one of the soundest in the world. As a result, we have remarkable stability here,” said Warren Jestin, chief economist of Scotiabank. “We’re special in that sense, but we’re not special enough to avoid the other headwinds.”
The strongest gusts from those economic headwinds include a decrease in the number of U.S. visitors to the country and a weak flow of international dollars in general.
A lack of clarity
Before presenting the 2009 Canadian Accommodation Outlook, David Larone, director of PKF Consulting in Toronto, started with a disclaimer. He said that while the hotel consulting firm usually prepares its outlooks in June or July, they’ve continuously tweaked the 2009 edition in a search for clarity amid the tumultuous financial climate.
“We are the end of the food chain,” he said. “What happens in the economy will affect us directly and indirectly.”
In terms of supply, 367,000 new guestrooms will enter the Canadian market in 2009. That represents a 1.5-percent increase—a reasonable number, especially when compared to the 4-percent increase expected in the U.S., according to Larone.
“On the demand side, you heard it here first: Demand is going to contract in 2009,” he said, putting the expected drop at 2.5 percent.
Other 2009 projections:
• Occupancy: 61 percent
• Average daily rate: CAD$133 (US$105.34)
• Revenue per available room: CAD$81 (US$64.15)
Larone said market performance will vary by region.
Key Region 2009 Outlook
| |
Occupancy |
ADR (CAD) |
RevPAR (CAD) |
| Halifax |
63% |
$130 |
$82 |
| Toronto |
63% |
$138 |
$87 |
| Ottawa |
68% |
$138 |
$94 |
| Niagara Falls |
52% |
$140 |
$73 |
| Montreal |
61% |
$139 |
$85 |
| Quebec City |
59% |
$142 |
$84 |
| Vancouver |
68% |
$141 |
$96 |
| Winnipeg |
68% |
$115 |
$78 |
| Calgary |
69% |
$157 |
$108 |
| Edmonton |
71% |
$126 |
$88 |
Source: PKF Consulting
Where we were
Before he offered his interpretation of the current downturn, Larone explained that “(when you’re) trying to put a perspective where we are today, often you want to look at where you came from.”
To do so, he compared the current downturn with two previous downturns: 1991-1992 (which he said actually began in 1989) and 9/11 and SARS.
Canadian Hotel Performance During Downturns
| |
Occupancy |
ADR (CAD) |
Supply |
Demand |
| 1991-1992 |
-8% |
+$2 |
+12% |
-3% |
| 9/11 and SARS |
-6% |
+$3 |
+8% |
-4% |
| 2007-2010 (projections) |
-2% |
+$6 |
+6% |
+3% |
Source: PKF Consulting
