GUEST COLUMN: The COVID-19 pandemic has heavily impacted the hotel industry, stretching hotel owners and operators to new levels, forcing them to adapt, innovate and be nimble.
The travel industry has faced many barriers. In August, however, Canada opened its border to many U.S. visitors and the number of travellers to Canada doubled, foreshadowing what’s to come for the industry. The international border (for some travellers from other nations) also reopened in early September.
After 18 months, the industry is beginning slowly recover and it is expected pre-pandemic peak levels will be reached in 2023.
For business leaders and investors in this space, it’s important to understand not only how hotels fared, but more importantly how they continue to hold their value.
Hotels adapt to new way of operating, for now
With minimal warning and no contingency plans in place, the demand for hotels essentially vanished overnight forcing owners and operators to become entrepreneurial.
Hotels have had to adopt a zero-based budgeting model; scaling back amenities and housekeeping, streamlining food and beverage options and employing fewer people to remain profitable.
With lower operating costs and a revamped model, the expectation is that there will be higher margins during the next cycle, as some of the elements adopted by the new model are carried through, accompanied by an increase in guest traffic.
Full recovery expected by 2023
With domestic and international travel on the rise, combined with positive industry forecasts, hotel RevPAR (revenue per available room) in Canada is expected to reach a full recovery to pre-pandemic peak levels by 2023.
While this may sound far away, it is in fact one to two years sooner than initially expected at the onset of the pandemic.
From a global perspective, there has been strong recovery in leisure travel demand and this is leading to recovery in hotel profitability.
China was the first to experience resumption in leisure travel, followed by the U.S. and now Europe, though all remain dependent upon government restrictions.
Despite the increase in leisure travel, the industry is experiencing an elongated recovery in business transient travel. This could be attributed to “return to office” taking longer than initially anticipated and inconsistent vaccination policies.
However, trends show demand has been improving and increasing week-over-week. Looking into next year, group business travel is expected to improve with rates at or above 2019 levels and room bookings are also expected to increase.
Industry leaders, investors must be patient
As travel restrictions change, there is no denying demand for hospitality will increase, ultimately resulting in higher profits and a steady recovery for the hotel industry.
Although a full recovery will not be immediate, there is certainly hope as the pandemic continues to run its course.
International travel is expected to be the biggest beneficiary of the changing travel restrictions and this recovery will ultimately benefit the 24-hour gateway markets that have also been heavily impacted by the pandemic.
In order to survive and thrive, hotels must continue to adapt in order to hold their value as external factors begin to work in their favour – industry leaders and investors will need to be patient.
Samuel Sahn is the managing director, portfolio management at Hazelview Investments.