According to a survey conducted by Colliers International Hotels and HLT Advisory, the economic recovery is unlikely to benefit the Canadian hotel industry until 2010. The survey of 325 hotel owners, managers and advisors found that 59 per cent of respondents anticipate seeing clear signs of economic recovery in 2010, with only one-fifth (19 per cent) of respondents expecting a recovery this year.
“One of the most striking findings is the prognosis for the remainder of 2009,” says Lyle Hall, managing director of HLT Advisory. “Respondents were at least three times more likely to forecast demand reductions than increases over the next six months. And that’s for all demand segments including leisure, corporate and group travel. Expectations are that we’ll see lower occupancies and rates in most parts of the country when compared to the summer of 2008.”
According to the survey findings, the corporate market segment, which consists of convention, meeting and incentive trips has the least optimistic forecast with almost two-thirds (63 per cent) of respondents expecting business activity in this sector to worsen during the remainder of the year. With the industry suffering from decreased demand for lodging accommodation, respondents cited aggressive rate discounting and new passport restrictions among the largest challenges.
“Hotels are increasingly competing by slashing rates, often initiated by one hotel forcing others to follow. Discounting is most apparent in the urban markets of Toronto, Vancouver and Montreal,” says Bill Stone, Executive Managing Director of Colliers International Hotels. “Higher gas prices and a rising Canadian dollar are also impacting travel and could cause further devastation to the summer travel season.”
The expectation of a recovery being more than six months away has had a dampening effect on hotel real estate values with less than 10 per cent of respondents predicting hotel transaction values at or above those realized in 2008. Half of respondents expect to see pricing as much as 25 per cent lower than in 2008.
“There’s no question expectations have changed in the short-term,” said Alam Pirani, Executive Managing Director of Colliers International Hotels. “However it is important to emphasize that the hotel industry has a much longer investment cycle which spans beyond one season or year.”