Trends in the Hotel Industry
Annual Operations Report, 2002 Results
This edition of Trends presents PKF’s 2003/2004 National Financial Outlook
for all hotels across Canada. Also included is a 2003/2004 Financial Outlook
specific to the Full Service and Limited Service segments. The 2002 results
presented have been obtained from the firm’s recently released annual Trends
in the Hotel Industry Annual Operations Report, an annual review of
Canadian Hotel operations conducted since 1970. This year’s sample draws
upon year-end 2002 financial statements from 555 hotels across the country.
The 50-page report provides detailed financial data by operating department
nationally and regionally for full service hotels, limited service hotels,
suite hotels and resorts.
Year in Review
Despite high hopes for the accommodation
sector, the industry failed to recover in 2002. Based on
the 2003 edition of PKF’s annual publication “Trends
in the Hotel Industry,” net income (after management
and franchise fees, property taxes and reserve for FF&E
replacement) was $9,855 per available room in 2002, up only
1.0% over 2001. Nationally full service hotels experienced
a slight decline in revenues in 2002, of $161 per available
room, or 0.3% less than 2001 results. Limited service properties
across Canada experienced a 3% increase in revenues per available
room in 2002 over 2001, with net income levels exceeding
2000 levels.
FINANCIAL OUTLOOK BY PROPERTY TYPE
In 2000, the industry was at its peak in
profitability with net income reaching $11,056 per available
room in 2000. Post September 11th, average bottom lines declined
to $9,773 in 2001, a decline of 12%. While these impacts
are significant, it is important to remember that the year
2000 market an all time high for Canadian hotel industry
profits. Further, while 2001 and 2002 profit levels were
down from this peak, we should not lose sight of the fact
that at an estimated $9,855 per available room, the industry
is still ahead of 1998 levels, which in itself was a record
year.
Financial Outlook
Due in large part to the Iraq War and SARS,
further erosion of bottom line profit is expected in 2003.
In recognition of year to date occupancy and rate results,
we are forecasting that average profits in 2003 will decline
to $8,248 per available room, a 16% falloff compared to 2002
levels. While mixed and confusing messages on economic and
global geo-political fronts make a forecast for 2004 difficult,
the prospects for improvement in overall industry earnings
are generally positive, with average profits expected to
increase to about $9,400 per available room.
Based on year to date results, full service
properties are expected to suffer more dramatic declines
in net profits than limited service properties in 2003. PKF
is forecasting that average profits for Full Service properties
will decline to $7,100 per available room, a 22% falloff
compared to 2002 levels. Looking ahead to 2004, full service
properties are anticipated to see an increase in net profits
to about $8,500 per available room.
Limited service properties are also forecast
to see erosion in net profits in 2003, from $8,100 per available
room to $7,600 per available room, a decline of 6% over last
year. In 2004, net profits for limited service properties
are projected to increase back to 2000 levels, to approximately
$8,000 per available room.
Erin O’Brien, Consultant
PKF Consulting
