Ottawa’s hotel industry still faces ‘big hurdles’ to return to pre-pandemic levels, leaders say

hotel

Hotel revenues in Canada’s major cities are expected to return to pre-pandemic levels by next year, according to a new report from a major real estate firm – but that rosy outlook is cold comfort to local industry officials who say Ottawa’s hospitality sector is still lagging other major centres.

The report from CBRE released Thursday says Canadian hotels made a “rocket-fuelled recovery” in 2022, thanks largely to a bigger-than-expected bounceback in domestic leisure travel and soaring inflation that pushed up average room rates.

The firm predicts the upward trajectory will continue over the next 12 months. CBRE is projecting that revenue per available room – a key metric in the hotel industry – will rise 11 per cent nationally from this year’s levels to $107 in 2023, about where it was in 2019, before COVID upended the hospitality sector.

The report is even more bullish on Ottawa’s year-over-year recovery. CBRE expects average revenue per available room at local hotels to jump 14 per cent next year compared with 2022, from $95 to $108. The overall occupancy rate, meanwhile, is projected to rise from 59 per cent to 65 per cent over the same period.

But the leader of Ottawa’s largest industry association argues that while the sector is on the right track, a closer look at the numbers suggests it’s a long way from hitting its stride.

“It’s better, but we still have some work to do,” Steve Ball, the president of the Ottawa Gatineau Hotel Association, told OBJ on Thursday. “There needs to be recognition that we’re in a little bit of trouble and we need some help.”

"There needs to be recognition that we’re in a little bit of trouble and we need some help."

Ross Meredith, general manager of the Westin Ottawa and the Delta City Centre, echoed Ball’s assessment.

“It’s been the slowest market in Canada among major cities to respond,” Meredith said.

Ottawa’s projected revenue per available room, for example, is below CBRE’s overall projected average of $114 for the province as a whole. 

Ball said the local industry’s current rate of $95 is a “fairly low number” due to a mix of factors, so the projected hike of 14 per cent in 2023 still doesn’t get it back to where it needs to be for local hotels to be on sound financial footing.

“Although (revenues) are improving, we are lagging way behind other major markets in Canada in our competitive set in terms of how well they’re performing,” he said.

Ball and other industry officials cite several factors for Ottawa’s failure to recover as quickly from the pandemic-fuelled slump as other big Canadian cities.

February’s Trucker Convoy protests dealt a crippling blow to the sector just as it was hoping to capitalize on the return of events like Winterlude, Ball said. His organization calculated that downtown hotels lost at least $18 million worth of bookings due to cancellations as a result of the protests.

“It damaged our reputation,” Meredith said, adding he believes some tourists are still wary of visiting the city after witnessing media coverage of the weeks-long demonstrations.

Ball and Meredith also noted that the No. 1 driver of local economic activity, the federal government, is still conducting most meetings and conferences remotely, meaning fewer people are travelling to the capital for in-person gatherings.

“Ottawa is in a bit of a unique position in that we’re so dependent on the federal government, and the federal government is changing the way they do business,” Ball said.

While a couple of major conventions gave downtown hotels a big boost last month – “We had an amazing August, no doubt,” Ball said – this fall’s meeting and events docket is nowhere near as full as it was in pre-COVID times, he added.

“There aren’t a lot of (conventions) on the books,” Ball said. “We’ll see a slowdown pretty quickly.”

Other hoteliers agree that despite a strong summer, the local industry’s outlook is far from certain. 

Nyle Kelly, the general manager of Kanata’s Brookstreet Hotel, said his property had its highest July occupancy rate ever at 84 per cent, fuelled mainly by a surge in pent-up demand for domestic leisure travel. 

But he said corporate bookings – which typically account for the majority of reservations at his lodging in the heart of the Kanata tech park – are still “really low” and showing no signs of an imminent rebound.

“The next six to eight months will be the true test of where our business truly is at,” Kelly explained.

Meredith also pointed to another factor for the industry’s struggles – the fact that air travel to the capital has been slow to regain altitude, due in part to the lack of international routes serving the city.

Passenger traffic at Ottawa International Airport is projected to reach just 50 per cent of pre-pandemic levels this year, a much lower percentage than in most other major Canadian cities, he said.

“We need to get past those … big hurdles for us to get back to what would be typical 2019 volumes and activity,” Meredith said. “There’s no reason to believe that we will be performing at the same level as the other Canadian cities.”

Ball said all levels of government must make reviving Ottawa’s tourism industry a top priority. With the city’s other two main economic drivers – the federal government and the high-tech industry – scaling back travel in the wake of the pandemic, it will be up to out-of-town leisure travellers to pick up the slack, he argued.

“If we’re going to move tourism to the top of the list, we have a lot of work to do,” Ball said, citing projects such as the redevelopment of LeBreton Flats, the revamp of Lansdowne Park and the revitalization of the ByWard Market as essential to the industry’s recovery.

“If we end up with a downtown core that’s got a lot of boarded-up businesses and doesn’t display well or provide the experiences tourists want, we’re up against it. It’s not just one easy fix. It’s so critical that we get all of the elements correct.”

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