TORONTO – What a difference a year makes. When PKF Consulting, which specializes in hospitality and tourism, held is annual outlook in early October last year, the projections for the year ahead were fairly positive. But a year later, with the recession continuing to wreak havoc across all industry sectors, and the year quickly coming to a close, the reality of 2009 was harsher than expected.
“What the hell happened?,” asked PKF director David Larone in his opening address at this year’s presentation. Larone and his colleagues, who joined him as part of panel presentations in Toronto and Vancouver, painted a bleak picture of today’s hotel industry.
“We’re looking at erosion of occupancy in every region in Canada,” explained PKF director Brian Stanford. “We’ve had a five-point drop in occupancy from 63 per cent in 2007 to 58 per cent this year. It’s the lowest level since 1992. Those five percentage points represent a total of five-million room nights lost in occupancy.” Though PKF believes demand levels will come back, the money lost from those room nights won’t.
In terms of regional performances, Fran Hohol, principal at PKF, said: “The West got hit stronger than Central Canada, due to the fall of natural gas prices.“ RevPAR fell by 18 per cent in Western Canada, compared to 17 per cent in Central Canada and 11 per cent in Atlantic Canada. Ironically, profitability levels have dropped to 1997 levels, down to $5,400 per room in Central Canada.
”The big problems are sitting in the major urban centres,” said Stanford, referring to sharp declines in occupancy in Montreal, Toronto and Halifax. “We’ve dropped six points in Toronto and we’re down $20 on rate from 2008,” he added, citing severe rate discounting as part of the problem.
On the investment front, there’s not a lot of activity. “Nobody is buying, nobody is selling,” said Stanford. As of June 2009, there had only been 29 transactions across Canada, compared to 48 last year and 68 a year earlier, in 2007.
According to Larone, there’s a conflict between operators and owners about operating in this current environment. Larone recommends disengaging from the situation in the U.S., while remembering our fundamentals are much stronger. “Every province is projecting a positive GDP for 2010, with growth rates above 2.8 per cent, said Hohol. She continued, saying, business travel is expected to grow by 4.5 per cent, leisure is expected to be up three per cent and a modest 1.9 per cent increase in the number of Americans travelling to Canada is also forecast. And, with the 2010 Olympics a few short months away, the potential for increased growth is even stronger.
“We’re poised for recovery,” concluded Stanford, pointing to forecasts for 2010 to 2015 that call for occupancy to return to 65 per cent. ”The irony, however, is that 15 years later, we’ll still be below where we were at our peak.”
