Hotel operators face a deeper crisis as lockdowns turn a very bad year worse

Open this photo in gallery:

Hotel operators are bracing for another devastating lockdown after suffering through months of ultralow occupancy rates during the pandemic.

Impending restrictions on travelling within Ontario are the latest blow to hotels that have lost most of their guests but for the occasional domestic traveller or front-line worker. Occupancy rates sank as low as 2.5 per cent for some hotels during the pandemic.

“The lockdown has caused further cancellations of bookings,” said Alnoor Gulamani, who owns nine hotels in Ontario through his Bayview Hospitality Group. “There was still travel happening within Ontario. This will come to a grinding stop if it is only folks who must travel that can travel,” he said.

Mr. Gulamani’s hotels, which are mostly Hilton brands, have an occupancy rate of about 10 per cent. That is well below his previous year’s occupancy levels in the 80-per-cent range, when his hotels were full of business travellers, group meetings and international tourists.

It is the same situation for Silver Hotel Group, which has 20 hotels in Canada including Hilton, Delta and Novotel brands in the major cities. Silver Group’s president said Canada’s recent ban on travellers from Britain will have little impact on his business because they have been subsisting on domestic travellers.

“Most of our business was coming locally from within Canada,” said Deepak Ruparell, president of Silver Hotel, which has had between 10-per-cent to 15-per-cent occupancy rates. “It is very challenging right now,” he said.

Ontario’s government on Monday urged residents to stay at home and limit travel out of their region. “We are taking the difficult but necessary decision to shut down the province and ask people to stay home,” Premier Doug Ford said.

Over the course of the pandemic, restrictions on non-essential travel, along with the disappearance of conventions and the two-week quarantine for international visitors have damaged the hotel industry.

Although Canadian residents started travelling more during the summer when coronavirus cases had subsided and the economy was reopening, months of little to no revenue are pushing hoteliers to the brink of collapse.

Open this photo in gallery:

The occupancy rate across all types of hotels in Canada was 28 per cent in November, down 54 per cent from the same month last year, according to data from hotel research firm STR. Revenue per available room, a key measurement of profitability known as RevPar, was $30.64, a drop of 66 per cent from November, 2019.

Downtown hotels, and in particular luxury hotels, which cater to group travellers, meetings and business people, have suffered the biggest losses. The occupancy rate for luxury hotels in downtown Toronto hit 2.5 per cent at the beginning of the pandemic and RevPar was $3.27.

Although demand picked up slightly over the summer, with occupancy rates rising to 22 per cent in August, they are back down. November’s rate was 12 per cent and RevPar was $17.39. That was 91 per cent lower than November, 2019.

Vancouver and Calgary were performing slightly better than Toronto, but still about 80 per cent lower than the previous year.

In contrast, hotels in resort areas such as Whistler, B.C., are not sustaining the same kind of losses. In August, their occupancy rate was 62 per cent with RevPar of $130.86. Last month, occupancy was 27 per cent and RevPar was just over $39, which is down 50 per cent from the same time last year.

STR is predicting a long road to recovery and says that even though occupancy should increase by nearly 60 per cent from this year to next, it will still be 40 per cent lower than prepandemic levels.

“That seems like a high percentage change, but that is coming from a low base,” said Ali Hoyt, a senior analyst with STR. “It will be a multiyear recovery,” she said.

Hoteliers such as Mr. Gulamani and Mr. Ruparell have qualified for some government help, such as the wage subsidies, but not for their fixed costs. Mr. Ruparell is looking at alternative uses for some of his extended-stay hotels, which have rooms with kitchens. He is converting one of them into a senior-care facility and will be selling it.

Mr. Gulamani said the past nine months have been the most difficult in his three decades of running hotels. He said his hotels are in danger of closing permanently. He said interest payments, taxes, utility costs and other fixed costs are becoming insurmountable when his business has lost most of its customers.

“We can’t continue at 10 per cent-or-below occupancy,” he said. “One of the most difficult decisions that a business owner has to make at this time is: Until what time do you just keep loading yourself up with debt before you give up. Loading up with debt is exactly what has been happening because we haven’t had enough revenue from our businesses.”

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.