In the Fall of 2010, when PKF Consulting published our National and Regional Outlooks for Canada’s Accommodation Industry, we considered whether Western Canada (and British Columbia in particular, which was emerging later from the downturn than eastern counterparts) would be fearful of their ability to drive revenue in a post-recession, Olympic year. As such, we have decided to take a closer look at the 2011 Q1 results.
The following chart highlights the top line performance for the past four years for Canada and Western Canada, including a focus on the Province of British Columbia. The results show the occupancy, ADR and RevPAR performance pre-downturn (2008), during the recession (2009), for the Olympic Year (2010), and for the first quarter of 2011.
Q1 Results – National, Western Canada, British Columbia |
|
2008
(Pre-Downturn) |
2009
(Recession) |
2010
(Olympics/Recovery) |
2011
(Today) |
National |
|
|
|
|
Occupancy |
56.2% |
52.5% |
52.4% |
53.3% |
ADR |
$124.18 |
$122.55 |
$128.12 |
$121.45 |
RevPAR |
$69.76 |
$64.28 |
$67.17 |
$64.79 |
Western Canada |
|
|
|
|
Occupancy |
61.2% |
56.4% |
55.5% |
54.3% |
ADR |
$126.32 |
$126.17 |
$140.93 |
$123.11 |
RevPAR |
$77.35 |
$71.18 |
$78.26 |
$66.84 |
British Columbia |
|
|
|
|
Occupancy |
58.4% |
53.6% |
56.2% |
50.4% |
ADR |
$127.77 |
$125.51 |
$161.04 |
$121.22 |
RevPAR |
$74.68 |
$67.23 |
$90.50 |
$61.11 |
On a National level, occupancy climbed slightly to 53.3% in Q1, a 0.9 point gain over Q1 2010 (which incorporates G8, G20, Grand Prix and Olympics) as compared to a 0.8 point gain over 2009 performance. The ADR continues to be an issue as witnessed by the fact that this rate fell $1.00 below 2009’s Q1 recession ADR levels. The national ADR trails the 2008 ADR by approximately $3.00, the 2009 ADR by $1.10 and by close to $7.00 over the first quarter of 2011, which takes into account the impact of the special events pick up.
Not surprisingly, the story in Western Canada is more dramatic. Occupancy percentage levels were 1.2 points lower over the first quarter of 2011 relative to 2010. At 54.3%, occupancy in Western Canada is at the lowest level for this Region since 2003, when Q1 occupancy was 53.5%. As expected, ADR declined in Q1 2011 relative to 2010, with no major impetus to support the lift in rate gained in the Olympic/special events year. However, the fall off is more dramatic than expected. At $123.11, rates are $3.00 lower than those achieved in Q1 2008 and 2009. This has resulted in a Q1 2011 RevPAR in Western Canada of $66.84, more than $10.00 lower than the pre-recession levels of 2008 ($77.35).
As we delve into the results for British Columbia, it is difficult to separate Olympic versus other impacts for 2010. New rooms supply and lower travel volumes led to a 5.8 point decline or 50.4% occupancy in BC in the first quarter of 2011. According to Statistics Canada data, total international tourist entries to BC in Q1 2011 declined 12.7% from the same period in 2010. While the year-over-year decline is inflated due to the surge of Olympic visitors in the first quarter of 2010, year-to-date 2011 traveler entries were the lowest observed since 1996.
There has been strong minerals and resource industry performance in BC with strength in related communities, however the effects of inclement weather, strong supply growth in certain regional cities and a lagging recovery are evident. In Other BC communities where the year 2009 was the peak performance year, a continuing year over year decline from 2009 through 2011 in the first quarter has been experienced. Greater Vancouver and Vancouver Island hotels overall were both tracking 2.6 percentage point decreases in Q1 2011 relative to the same period in 2010. However this Greater Vancouver occupancy point decline of 2.6 in 2011 as compared to 2009 can also be interpreted positively as the number of occupied rooms grew by a larger percentage. The meetings and convention activity is encouraging in Vancouver in 2010, although there are fewer cruise ship offerings. Although Resorts nationwide are tracking similar occupancies relative to 2009, Whistler occupancy was down 7.5% compared to 2009 in Q1.
The lack of strength in average daily rate is also a major challenge for hotels in BC in 2011. At $121.22 in Q1 2011, Provincial ADR was close to $7.00 below 2008 levels, and $4.00 lower than that achieved in 2009. Nowhere is this more evident than in Whistler, where ADR in 2011 is $59.00 below 2008 levels, in spite of the almost $76 gain this market realized in 2010.
Nevertheless, in individual markets, PKF notes that there are month over month rate increases and hotel operators are gaining the confidence to charge more for their products and services. Many hotels are forecasting rate increases.
Q1 Results – British Columbia |
|
2008
(Pre-Downturn) |
2009
(Recession) |
2010
(Olympics/Recovery) |
2011
(Today) |
Greater Vancouver |
|
|
|
|
Occupancy |
64.2% |
58.3% |
66.1% |
55.6% |
ADR |
$123.33 |
$121.52 |
$174.41 |
$121.49 |
RevPar |
$79.14 |
$70.90 |
$115.23 |
$67.61 |
Vancouver Island |
|
|
|
|
Occupancy |
54.9% |
51.7% |
47.9% |
49.3% |
ADR |
$99.00 |
$100.57 |
$101.45 |
$100.59 |
RevPar |
$54.35 |
$52.03 |
$48.60 |
$49.57 |
Whistler Resort Area |
|
|
|
|
Occupancy |
80.0% |
72.4% |
73.1% |
64.8% |
ADR |
$292.97 |
$257.30 |
$333.15 |
$236.78 |
RevPar |
$234.44 |
$186.38 |
$243.47 |
$153.41 |
Other British Columbia |
|
|
|
|
Occupancy |
47.2% |
43.4% |
42.1% |
40.7% |
ADR |
$99.64 |
$105.27 |
$106.43 |
$99.63 |
RevPar |
$47.03 |
$45.73 |
$44.80 |
$40.60 |
Results for the months of April and May show some signs of relief, with Vancouver’s occupancy up 2.2 points in April and 7.9 points in May over the year prior, with a huge impetus from the convention centre activity in May. However, Whistler’s spring results are mixed, with occupancy levels up 2.7 points in April, but down close to 6.0 points in May, compared to last year. The average rate in Vancouver rose 2.8% in April and 8.5% in May due to strength in the downtown market. Whistler continues to see-saw, with rates for the month of April 8.6% lower than 2010, while the ADR for May rose by 1.4%.
Like any hangover, the current headache is not expected to last. The Conference Board of Canada is forecasting solid demand growth for British Columbia in 2012 and onward. As travel volumes to BC recover, the opportunity for rate growth will be present, and these markets are expected to recover in the short to mid term.
Erin O’Brien, Senior Consultant
PKF Consulting Inc. Toronto
