By Steve Ball
Hotels function on a pretty simple economic principle. They measure their performance based on the average occupancy and the average room rate. Hotel investors, including the people that own and/or finance hotels look at RevPAR as a measure of property value, which is basically the revenue per available room to rent over the year. But when there is no business to be had due to a worldwide travel ban and the closing of international borders to the travelling public the model goes out the window.
In Ottawa, we have seen multiple hotel closures in the month of March and those properties that remain open are operating with a skeleton staff and providing reduced services. The Hotel Association of Canada predicts as many as 90% of hotels in Canada will close before this crisis is over. Most hotel closures will be temporary but there will likely be some casualties that won’t survive.
During normal time there are over 300,000 people employed in the hotel industry in Canada and approximately 6000 in Ottawa and Gatineau. Most of these frontline workers have been laid off. Never could one predict such a rapid and absolute decimation of an industry in such a short period of time.
But hotels are resilient. Several are providing accommodation for Canadians looking to self-isolate upon their return to Canada. Some are housing emergency-shelter clients and people who are the most vulnerable and disadvantaged in our community. Others provide shelter to healthcare workers and frontline staff who are afraid of going home and possibly infecting their families. Quebec is planning to move relatively healthy non-critical patients out of hospitals and into hotels to make room for serious COVID-19 patients.
Hotels have a great track record for helping out when called upon during a period of crisis. Examples of this can be found during ice storms, severe flooding, tornadoes and other emergency situations. There will be heroes once this COVID-19 virus passes, but they will likely go unnoticed because hotels don’t generally look for accolades. I’m proud of the properties that donated their perishable food items to the Shepherds of Good Hope once they were forced to close their food and beverage operations a few weeks ago. Thank you.
Hotels are part of the fabric of our community and we are lucky to have the variety of brands and properties that we do. What may surprise people is that most hotels are small and medium businesses that operate on very slim margins. Many are family owned and operated and don’t have access to capital resources when revenue dries up. People assume the brand name, like Marriott, is the owner of the property but that is not the case. The brand is hired to run the operation on behalf of the owner. A prolonged reduction in business can be devastating and very quickly impact their ability to survive.
We hope the measures put in place through self-isolation will reduce the spread of the virus and that this crisis will end quickly. And when it is safe to do so, most hotels will open their doors again and welcome visitors to our beautiful city. In 2019, tourism generated over $2.2 billion in revenue in Ottawa and it is our third largest business segment. Visitors contribute a substantial amount to the economy of the By Ward Market. Fortunately, we have a range of hotels serving different clienteles that helps us a very competitive global marketplace.
How can you help? Look at travelling within Canada once this crisis is over. Encourage your friends and relatives to visit Ottawa and experience all the great things our Capital has to offer. The faster our economy gets back on track the better we will all be as a vibrant community.