Hoteliers aren’t exactly breaking open the champagne now that occupancy and room rates are inching up, but those who have committed to upgrades and renovations are feeling splashes of hope that their investments are paying off or will soon reap benefits.
InterContinental Hotels Group (owner of Holiday Inn, Crowne Plaza, Candlewood Suites and others), Starwood Hotels and Resorts (Westin, Sheraton and Meridien, for example) and other accommodation interests are competing for consumer loyalty with the return of business traveller traffic during this economic recovery.
But most hotels that have finished or are completing major upgrades generally began them before the 18-month recession began in late 2007. It’s more the norm for properties to delay work deemed non-essential, or simply undergo nips and tucks instead of full facelifts, says Anthony Pollard, president of the Ottawa-based Hotel Association of Canada.
Mr. Pollard says most hotel renovations these days are being done on a piecemeal basis, which is “symptomatic of the economy.”
“It’s not like, ‘Occupancy is down and that’s a good time to do major renovations, while rooms are empty.’ That’s not happening,” he says from his home in Pembroke, Ont.
Many hotels are holding back on non-vital work – sticking with the carpeting instead of changing to hardwood floors, for instance – but proceeding with improved safety and security, such as new alarm systems and door locks, because consumers consistently cite safety and security as most important, Mr. Pollard adds.
Although 2009 proved to be challenging for Canada’s hotel industry, it performed better than other markets, says Alam Pirani, a hotel analyst and executive managing director with Colliers International Hotels, a real estate investment advisory firm serving the lodging industry.
A Colliers report says occupancy and average daily room rates dropped 8 per cent in 2008 and 12.3 per cent in Canada last year, “but optimism is returning to the market, and consultants are forecasting an average of three to four per cent growth in revenues, which is healthy,” Mr. Pirani said in an interview from his Toronto office.
The American Express Global Business Forecast, released in October, predicts hotel rates will return to pre-recession prices in 2011.
To that end, internationally, Starwood has guest-room revamping plans on the go for a fraction of its Sheraton and Westin brands, at an estimated cost of $100-million (U.S.), while other business travel hotels are undergoing major work in big U.S. centres, Europe and Shanghai. InterContinental Hotels Group’s (IHG) global revitalization of its Holiday Inn and Holiday Inn Express brands is expected to be in the $1-billion range.
Still, there’s a distinct “go” and “slow” in the hotel renovation world, according to industry members including Mr. Pollard.
In Canada, he says, the Hilton Toronto Airport Hotel and Suites spent $15-million renovating all the public areas and rooms. The project, which was completed in recent weeks, includes new guest rooms with fine linens, and a separate ergonomic working area with halogen lighting and special chairs. The Ritz-Carlton Hotel in Montreal, on the other hand, has been closed for the better part of a year as it undergoes major renovations “from top to bottom,” he adds.
The Ritz-Carlton is among a special breed of luxury hotel: ones converting portions of their buildings into condominiums, as a way to get the capital to fund large-scale renovations, says Mr. Pollard. Also in that category are the completed Shangri-La and Four Seasons in Toronto, as well as the city’s King Edward Hotel, which is planning significant renovations in 2011, although Mr. Pirani stresses that the recession has dampened growth in the condo-hotel market.
Mr. Pirani also notes that among hotels emphasizing mega-renovations are those looking to attract business for special events, such as the Four Seasons in Vancouver, in preparation for the Winter Olympics. The upgrades to the 34-year-old hotel included a contemporary design reflecting British Columbia’s natural environment, a new standalone restaurant, and the revamping of the 372 guest rooms and 23,000 square feet of meeting space, including with new fibre-optic cabling for wireless communication.
Four Seasons director of marketing Kostas Christopoulos says the hotel was committed to the renovations despite the economic woes because, Olympics aside, “We’re seeing a positive trend, we’re seeing occupancies coming back.
“We’re coming out of the worst recession since the Depression, but we also saw it as the best time to make the renovation investment in the hotel because as we get out of the economic slowdown, we’re going to be positioned with a great product.”
Four months before this summer’s G8/G20 economic summits in Huntsville, Ont., and Toronto, the Holiday Inn Barrie Hotel and Conference Centre finished $3-million in work that included installing giant floor tiles in the lobby and upgrading wall vinyl, as well as adding custom artwork and stylish new furniture in warm earthy tones.
The work was needed because Holiday Inns “have had the perception of being a little bit tired,” says Helen Wallace, duty manager at the hotel, which will rebamp its 13 meeting rooms starting in December.
But does all this primping and priming contribute to the bottom line?
Mr. Christopoulos says the Four Seasons Vancouver’s facelift has drawn great customer feedback. “The results from the refurbishment have been really positive – guests have commented how lovely our hotel is.”
Britain-based IHG, which franchises, leases, manages or owns more than 4,500 hotels worldwide, translates renovation success into revenue growth: Third-quarter figures showed the about 1,900 relaunched Holiday Inn and Holiday Inn Express brands had revenue-per-available-room growth of 7.9 per cent and 6.8 per cent, respectively, strongly outperforming the 484 hotels that had not undergone major work.
Mr. Pollard notes that all brand-name hotels go through quality service reviews of everything from their suites to the public areas, after which head office will then tell hotels what improvements are needed to meet global brand standards that must be met, or a hotel risks losing its brand “flag.”
“If you’re operating a top-notch hotel, and you’re not doing those things, it can have a negative impact on the brand, because people want consistency in a name,” adds Mr. Pollard.