Post
9/11, the Canadian hotel industry was not anticipating robust
performance for the balance of 2001 or 2002. However, the Canadian economy has proven
to be resilient, surpassing growth expectations in the fourth
quarter of 2001 to end the year with GDP growth of 2% and
avoiding the dreaded “R” word. Economic
indicators and travel forecasts for the balance of 2002 provide
reason for guarded optimism. Over the past month, economists
have been increasingly optimistic in terms of their projections
for the upcoming year. Most are indicating improved
GDP growth by the second quarter of 2002 with annual growth
of about 1.5%. Some recent pronouncements by Canadian
bank economists are suggesting annual GDP growth of 3.0%
in 2002. The picture for 2003 is even more positive
with GDP growth of between 4% and 5%. All travel segments
are expected to realize growth in 2002 and 2003. Domestic
pleasure travel and U.S travel to Canada will be strongest
in 2002 with 2.3% and 4.3% growth respectively. Domestic
corporate travel and international travel to Canada are expected
to bounce back in 2003 with growth of 3.0% and 4.6%.
Looking at the performance for the first
two months of the year makes it difficult for many operators
to be wildly enthusiastic about the prospects for this year. Despite
the improving economic news both north and south of the border
corporate travel has not returned to desired levels. By
year-end 2002 PKF has projected that the Canadian hotel industry
will have realized moderate occupancy and rate gains from
2001 levels. The real question is: At what point
in 2002, will the Canadian accommodation industry start to
realize the benefits of improving economic performance? Whether
improving economic conditions translate into demand growth
in the 2nd or the 3rd quarter of 2002,
the Canadian Hotel industry should still maintain a positive
earnings curve.
The events of September 11th had
a significant impact on the Canadian accommodation industry. Based
on pre-September 11th performance to the end of
August, the industry was on track to end the year at 64%
occupancy and a $116 average daily rate, with our 2002 outlook
at 64% occupancy and a $119 average daily rate. The
industry ended the year at 62% occupancy and a $114 average
daily rate, with our revised outlook for 2002 at 63% occupancy
and a $117 average daily rate. There has also been
an adjustment in industry profitability as a result of the
events of 2001. Actual profitability in 2001 was 12.3%
lower than expected, and in 2002 is expected to be 10.3%
below Pre 9/11 expectations.
