Home May 2017 A Room for the Night

A Room for the Night

Calgary’s hotel industry withstands the downturn

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Calgary Airport Marriott In-Terminal Hotel – exterior.

Though perhaps not the first thing one thinks of when considering business in Calgary, the local hotel industry should not be overlooked. With 98 hotels totalling 14,229 guest rooms, the long-established (over 100 years) industry provides essential services – lodging, food and beverage and conference facilities – to various other sectors including the business community, tourism, and sports and leisure industries. It is, in part, how Calgary attracts the world.

And like most other businesses in this city, it has seen better days. “The Calgary hotel industry has been hit hard by the economic downturn,” says Jason Wight, vice president at HVS which provides consultation, valuation and research in the worldwide hotel industry. “The city ended 2016 with [revenue per available room] at a 10-year low. Lodging demand declined in both 2015 and 2016, which was a direct result of the slowdown in the energy sector.”

Industry insiders confirm these findings. “Clearly right now we’re in an economic downturn,” says Dan DeSantis, board chair of the Calgary Hotel Association and dual manager for the Calgary Airport Marriott In-Terminal Hotel and the Delta Hotels Calgary Airport In-Terminal. He reports rooms sold were down 3.3 per cent in 2016, while the supply (or new build) inventory was up 5.9 per cent. “In economic downturns there always tends to be an oversupply of rooms,” DeSantis explains.

Eight hotels opened in 2016, many near the airport. “The decline in demand and increase in supply pushed the occupancy rate down into the 50s for the first time in the history of the Calgary market,” Wight says. “In this difficult environment, Calgary hoteliers have resorted to substantial rate discounting to retain market share.” Nonetheless, Wight estimates 2016 total hotel room revenue was approximately $430 million.

Not surprisingly, DeSantis is looking forward. “Certainly we know the economy is going to bounce back and we’ll get back to strong economic growth in the city,” he says. “And in upswings there are never enough rooms.”

He notes Calgary is, in general, a good place to run a hotel. “Calgary has a strong business community and it’s also the gateway to the Rocky Mountains,” he says. “These, along with strong sports and culture in the community, make for a good place to operate a hotel.”

Customers include corporate, leisure and group travellers, as well as contract groups such as aircrew. Business travellers are regional, national or international in nature, while many leisure travellers are international or, increasingly, regional. “We do a lot of regional traffic through both the summer and winter,” he says. “Whether that’s sports teams coming in for tournaments or summer staycations. This has been the case over the last couple of years.”

Cindy Ady, CEO of Tourism Calgary, highlights what attracts the leisure travellers. “First, people are on summer vacation and choosing to travel to Calgary. Second, we have an exceptional lineup of events and festivals in the summer months, including the Calgary Stampede and the Calgary Folk Music Festival, as well as a robust offering of attractions.”

Joseph Clohessy, general manager at the Calgary Marriott Downtown, says business varies throughout the year, depending on location. “We’re more business-orientated from November through April and then May through October we’ve got more leisure or group convention business,” he says. “Our busiest months would be June, July and August – with that good combination of leisure, corporate and group all coming in at the same time.”

The industry is ever changing, with technology leading the way. “Wi-Fi is a hot commodity,” Clohessy says. “People have multiple devices and always want to be connected – having a good Internet infrastructure is critical.” In-room entertainment preferences have also evolved. “Customers are looking to get their basic TV channels but also want access to their Netflix (or other online content) account,” he says.

Another shift has been to mobile check-in and key. “You’re able to check-in from your smartphone,” DeSantis explains. “Mobile key allows you to use your smartphone to find your room and then unlock the door with your phone.”

Customer preferences for a blend of business and leisure activities are also driving changes. “People want to achieve as much as possible,” Clohessy says. “They want to continue their workout routine, they’re being productive with their project, and they want to go out and experience what Calgary has to offer and then share it on social media.” Strong food and beverage options – such as an on-site restaurant offering local fare and grab-and-go options – are demanded, as are state-of-the-art gyms and technologically-advanced business facilities. “Social media continues to play a big role in hotels,” DeSantis adds, “because we’re able to get instant feedback on how the guest is either enjoying or concerned about their experience.”

According to Wight, there are only two luxury hotels in Calgary, one of which is Hotel Le Germain. “As a boutique hotel we are the truly only one on the market,” says Lionel Houliat, general manager of the hotel. He agrees an on-site restaurant, exceptional conference facilities and the latest technological offerings are key. Le Germain offers additional services and amenities such as a spa and complimentary Lexus car service within the core. “[The hotel industry] changes/adapts very fast; we consistently improve our services in order to anticipate guest expectations,” Houliat says.

Many large hotel chains are represented in the city, including Marriott International (16 properties), Wyndham Worldwide (16 properties) and InterContinental Hotels Group (eight properties). Twenty-five hotels are independently owned.

“There is a variety of hotel owners in Calgary ranging from a single hotel owned by an individual to a REIT or pension fund,” Wight says. In general, the smaller limited-service hotels are owned by individuals or local companies. “Most of the full-service downtown properties are owned by large corporations, REITs or pension funds.”

Other industries survive off of Calgary’s hotels as well. For example, two companies provide laundry services for the industry. K-Bro Linen Systems has been in the business for years, while Linitek Inc. got started in June 2015.

The newer company has a 20,000-square-foot facility in the northeast. “We are equipped with the best-in-class tunnel washer and dryer systems, ironers and modern linen tracking system,” Ioan Nica, managing director and partner, explains of the German equipment.

Nica says business has improved since Linitek opened; it currently has nine hotel customers. “Ninety-five per cent of Calgary hotels do their laundry in-house,” he laments, “because they don’t understand how much they can save.” For example, his facility can wash 200 pounds of linen in 90 seconds, whereas in the typical hotel 75 pounds takes 45 minutes. “They can save at least 50 per cent if they come to us.”

He compares his Calgary operation to the one he’s had in Atlanta for the past five years. “Hotels there rarely launder in-house because it’s way more expensive.”

With a general belief that the worst is over for Alberta’s economy, Wight expects lodging demand to increase in 2017. “Calgary has historically absorbed the addition of new hotels with ease,” he says. “However, with the number of new hotels that have opened over the past several years, it will take many years for the market-wide occupancy to return to levels even near the previous peak.”

He adds that while hoteliers have experienced declining revenue, they have also had to deal with additional costs. “The minimum wage increase and the carbon levy are two additional factors that hotel stakeholders are having to manage.”

A strong and long-standing industry, with undoubtably better times ahead, Calgary’s hotels have withstood the harsh economic times, and are emerging intact and poised for the future. They remain an irreplaceable part of the city.

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