The changing hotel landscape

ACTE Business Intelligence Series offers look at hotel marketplace, 2017 forecast

September 21, 2016
by Michael Power
Eric Jongeling, director, at Carlson Wagonlit Travel’s Hotel Solutions Group.

Eric Jongeling, director, at Carlson Wagonlit Travel’s Hotel Solutions Group.

TORONTO: When it comes to hotel room rates, how the market is fairing depends on where in Canada—or indeed the world—you are. That was the message from Eric Jongeling, director, at Carlson Wagonlit Travel’s Hotel Solutions Group. Jongeling presented a North America hotel market summary during the Business Intelligence Series in Toronto for the Association of Corporate Travel Executives (ACTE) on September 15. About 100 ACTE members attended the event, which was held at the Radisson Admiral Hotel Toronto-Harbourfront

On the West Coast, Jongeling noted, the weather plays a role in average daily rates (ADRs), while Central Canada has experienced challenges due to that market’s dependency on the oil industry. Meanwhile, the East Coast has a mixed market, he said. New York, for example, was once a strong market but came up negative last year. That’s mostly due to the amount of supply coming into the market and a bit of catch up. As well, that city has focused more recently on mid-scale properties.

It’s currently a strong seller’s market, Jongeling said, with most chains pushing dynamic pricing. Last year, many in the hotel industry were focusing on wi-fi, with most chains declining to provide it for free. But customer pushback has meant that now, almost all chains provide standard wi-fi to guests.

Forecasting the future
Globally, many factors are affecting the market at the moment, Jongeling noted. For example, recent hotel mergers are having a large impact, while China has seen a lot of investment since the government in that country eased restrictions. That’s meant that the ownership landscape is therefore changing, he said.

Jongeling spoke as well about the overall Canadian economy. The country’s GDP is close to two percent, he said, which was “not bad” but not as strong as anticipated. Unemployment was “somewhat high” but other economic metrics remain strong. Canada’s interest rates are down and inflation remains low, both of which were favourable, he said.

Vancouver has seen a strengthened market this year, Jongeling said, while Montreal is also stronger. Vancouver’s occupancy is at 80 percent due to a lack of available land, which drives growth. Toronto and Montreal are expected to have moderate growth of four-to-six percent. Meanwhile, Calgary and Edmonton saw their ADRs at higher levels two or three years ago, said Jongeling. Now, the picture in those cities has changed and, while not terrible, the markets in those cities are not doing as well as they had previously. Meanwhile, the growth expectation for Canada overall is 5.7 percent.

Hotel mergers
The trend towards hotel chain mega-mergers has also altered the landscape, Jongeling noted. He cited the Marriott-Starwood merger as an example, saying that the Marriott of three years ago was a totally different company. In 2014, the chain didn’t have a global reach—but that reach has increased since then. There will be competition within the chains as well, he said, as they compete for business amongst each other.

The sharing economy
Regarding the sharing economy and services such as Airbnb, Jongeling said that in a study of two large technology companies, both organizations allowed their employees use such services. However, only 2.5 percent of travellers used them. So there’s a lot of talk about the shared economy but less actually happening. But there may be future growth in corporate traveller use of sharing economy services, he said, with Airbnb trying to convince organizations of the security of such services.