Weak loonie hurting hoteliers along US border
12 OCTOBER 2015 6:13 AM
Visiting the U.S. has become a more expensive proposition for Canadian travelers, and hoteliers are seeing some impact.
REPORT FROM THE U.S.—With an unemployment rate hovering near 7% and its loonie trading at 75 cents on the U.S. dollar, Canada is not the source market it once was to many hoteliers south of the border.
Gerry Chase, president and COO of Shelton, Connecticut-based New Castle Hotels and Resorts, said his hotels in Portland, Maine, and Syracuse, New York, are both affected—but on different levels.
“Canadians are staying more in Canada right now versus coming to the United States,” he said. “It’s not the end of the world up there, but it is causing us in the U.S. to lose some of that business.”
Canadian business is down 24%, which represents approximately 2% of the total occupancy of New Castle’s Syracuse hotels. The hotels are up year over year.
The Portland, Maine, market has seen a 20% decrease in demand from Canadian travelers, Chase said. All Canadian business represents approximately 5% of New Castle’s total demand in the market, he said.
Related industries are seeing declines as well. The Nova Star ferry from Maine to Nova Scotia has seen a 40% drop in the number of Canadian passengers compared to last year, the Portland Press-Herald reported in September.
“They are totally dependent on U.S./Canada travel,” Chase said. “We’re not. We have business from other areas of the country and all over the world. We’ve had a nice (revenue-per-available-room) increase, and an increase in demand growth in the United States.”
The closer you get to the border, troubling numbers are even more common. Greg Dugal, president of the Maine Innkeepers Association, said hotel demand in his purview is down as much as 40%.
“People are still coming, but staying in smaller rooms or staying for less time,” he said. “There’s a noticeable absence of their spending power, even when they do come.”
Dugal mentioned Old Orchard Beach specifically, where 80% of travelers who traditionally visit are Canadian. This year, that’s down in the 60% range, he added.
Lyle Hall, managing director of HLT Advisory, said those who live close to the border better understand—and are thus more wary of—the unattractive exchange rate. Data provided by Hall showing same-day and overnight travel of Canadians to the United States indicated a direct relationship between a devalued loonie and reduced day trips to the States, but limited impact on outbound overnight travel.
“Day versus overnight are very different,” Hall said. “Day travel by Canadians going into the United States is largely driven by shopping” for things such as clothing, longer-term items, food and gas. “I’m one of those people who would think nothing of hopping in the car and driving across—but not now that it’s almost a third more,” he said.
Ron Droegmyer, GM of Sheraton at the Falls in Niagara Falls, New York, said a large marketing budget has helped to offset a slowdown in business from Canada.
“So far, we haven’t been that affected,” he said. “Most of the hotels in my comp set are much smaller and don’t have the marketing arm that I’m allowed to have. … Where the Canadian traffic has slowed down, the U.S. traffic has picked up.”
Dugal said it’s important to keep in mind the cyclical nature of the business.
“These things happen, and it has been worse,” he said. “But let’s remember that in 2008, the Canadian markets saved our butts.”