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Sector Spotlight: Hotels

The hotel industry comprises 8,178 properties offering 447,586 rooms and employing 304,000 staff.

The Canadian hotel industry is well diversified with a range of accommodation models. There are mid-range facilities to suit business travellers wanting clean, affordable rooms with digital connectivity, as well as luxury establishments for visitors expecting top-dollar rooms plus fine-dining and spa/fitness options.

Facts and figures

According to the Hotel Association of Canada’s (HAC) 2016 figures, the hotel industry comprises 8,178 properties offering 447,586 rooms and employing 304,000 staff. Current average occupancy rates are running at 64% and the hotel sector generates $18.4 billion in accommodation revenue, contributing $8.1 billion in federal taxes.

IBISWorld quotes an annual growth rate of 1.9% for the period 2012-2017, and notes that larger hotel chains (e.g. Hilton, Marriott and the Intercontinental Hotel Group) ‘are consolidating to increase their foothold in a slow-growth environment.’

Hotelier magazine calculates that change of ownership transactions for 2016 were $1.8 billion, with the Ontario region alone responsible for 86% ($1.1 billion) of that sales volume.

The national outlook for the market remains positive, with more than 75% of owners confirming plans to look to purchase or develop new hotel properties during 2017. (Canadian Hospitality Trends)

Market growth

In the wake of the global recession, the sector has registered modest growth over the last five years.

And with Canada’s economy growing equally as slowly, consumer confidence has been somewhat brittle, which has made Canadians more reluctant to plan overnight domestic trips.

Likewise, owners of hotels and motels which accommodate international travellers, have had to contend with a falling number of inbound visitors choosing Canada as their destination.

Bolstered by more stable volumes of affluent travellers, the market’s high end has been less affected by this trend, and the industry anticipates a gradual improvement over the next five years as consumer spending begins to return to former levels.

Challenges facing the sector

Like businesses elsewhere, the hotel industry finds filling vacancies and retaining staff no easy task.

This requires strong and sustained efforts to communicate the rewards and benefits of working in the hotel sector, plus continued investment in education and training to give workers a sense of career progression and opportunities for promotion.

Without reliable sources of human capital, the industry will struggle to maintain the essential high standards of cleanliness and service which underpin the meaningful customer experiences and create new business.

The downturn in international travel is a global phenomenon, and fluctuations tend to be influenced by political and economic factors at both local and international levels.

So, as elsewhere in the tourist industry, hotel operators must aim to maximize the value they offer to consumers whilst trying to react flexibly to the threats and opportunities such a fluid situation presents.

Airbnb growth continues to create turbulence in the sector as a generation of millennials embrace the ‘sharing economy’.

However, mid-range hotels and areas of high tourist demand seem to be the most affected. Generally speaking, those seeking luxury accommodation are unlikely to be swayed by a basic offer which lacks the upmarket amenities they regard as essential.

Furthermore, many hoteliers predict that the continued rolling out of disability legislation, fire-safety codes and tax measures will damage the ability of Airbnb rivals to compete.

Business requirements

The hotel sector can be split into three segments: limited-service, mid-range and extended-stay – each is primarily defined by the features and facilities it offers.

Limited-service hotels offer a basic, ‘no frills’ experience, often without significant food and beverage options. Nevertheless, there is a tendency for some operators to provide some basic extras, such as complimentary Wi-Fi and a limited breakfast menu, to stave off competition from other providers.

Mid-range hotels are less easy to pigeonhole with many offering services focused on particular features and others aspiring to provide a more upmarket menu of service options at prices which undercut luxury hotels. Mid-scale establishments are located just outside premium city-centre sites where prohibitive costs would weaken their business model. Business travellers and tourists looking for bargains are the mainstay of many such hotels.

Extended-stay providers offer all the home comforts their long-stay guests require. Whilst these rooms often come with luxury treats and privileges, they will have everything visitors needs to eat and sleep, work productively, or relax in comfort and style. The extended-stay sector has become particularly resilient for several reasons. Not only are their guests able to ride out economic austerity, these establishments enjoy certain trading advantages – for example, longer stays produce higher occupancy rates, and reduced needs for cleaning and check-in staff.

A snapshot of industry support

Here are just some organizations that offer a variety of support to the hotel sector:

The Hotel Association of Canada is an umbrella association which acts as an advocate for Canada’s Hotel and Lodging Industry.

Canadian Star Quality Accommodation is a countrywide rating program which reviews the services and features provided by each particular location and awards from one to five stars as appropriate.

Focusing on training and standards, the Canadian Tourism Human Resources Commission has created a varied national e-merit training program which is appropriate for seasoned employees as well as newcomers.

Buying a business

Buying a hotel business often requires the services of a business broker who understands the hotel and lodging market.

You will aso need to perform due diligence to verify the true worth of the business you wish to buy.

However, you must also underpin this effort with your own thorough research to explore the future potential of your proposed purchase.



Bruce Hakutizwi

About the author

USA and International BusinessesForSale.com Manager for BusinessesForSale.com, a global online marketplace for buying and selling small medium size businesses. The website has over 60,000 business listings and attracts over 1.5 million buyers to the site every month.

@BizForSaleUS

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