Curtis Gallagher, who leads Avison Young’s hospitality business for Canada, said while a local recovery is “underway,” Ottawa’s return to pre-pandemic occupancy levels “may be a little bit slower-paced than some of the other markets” the firm surveyed.
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Occupancy at Ottawa hotels rose 52.5 per cent last year compared with 2021, according to a new report, but industry leaders say the local sector’s recovery from the pandemic won’t be complete until the federal government starts doing more business in person. Ottawa hotels finished the year more than 60 per cent full on average, Avison Young said in its 2022 Canada hotel market report. That puts the nation’s capital in the middle of the pack among the six major cities the real estate firm looked at. Vancouver led the way with an occupancy rate of 72.9 per cent in 2022, followed by Toronto at 67.9 per cent and Montreal at 62.1 per cent. Ottawa was next at 61.2, with Calgary (58.5) and Edmonton (51.8) bringing up the rear. Curtis Gallagher, who leads Avison Young’s hospitality business for Canada, said while a local recovery is “underway,” Ottawa’s return to pre-pandemic occupancy levels “may be a little bit slower-paced than some of the other markets” the firm surveyed. The National Capital Region relies heavily on people coming to town for government meetings to fill its hotel rooms – business hasn’t come close to rebounding after COVID-19 scuttled virtually all face-to-face interactions. “While leisure and small-group (travel) tended to come back, the bigger business, larger group and government (clientele) needs to come back,” Gallagher said in an interview on Friday morning. “The one positive thing is government isn’t going away. It’s just a matter of what are the projects they’re engaging that draw people into the city to create that demand. And that’s TBD.” The head of the region’s main hotel industry group agrees. “Ottawa was built to support the federal government,” Ottawa Gatineau Hotel Association president Steve Ball told OBJ this week. “That’s why we’re lagging behind the other big markets. We’re still improving, there’s no doubt, but perhaps not at the same pace that the other markets are because we are so dependent on federal government business.” Still, industry observers say most signs point to a strong year ahead for the local hospitality sector as leisure travellers and meeting and convention delegates are expected to flock back to the capital in volumes approaching pre-COVID levels. Ottawa Tourism says demand for hotel rooms in 2022 lagged about 17 per cent behind 2019, the last full year before the pandemic. With leisure and convention business picking up, the marketing agency says its 2023 projections call for demand to be “quite close to 2019 levels, with seasonal fluctuations anticipated throughout the year.” Ball said the leisure travel forecast for the rest of the year is “all good” as marquee events such as Ottawa Bluesfest that tend to attract large numbers of out-of-town visitors are back in full swing. However, while many hotel meeting spaces and ballrooms are now seeing steady demand for events like wedding receptions, Ball said corporate and government bookings still aren’t flowing in at the rate most of his members would like. “What we still need to wait for, and hope will recover, is that corporate (business),” he said. “Once that’s back, then we’ll be fully up and running.” Revenue per available room, another key industry metric, also isn’t rising as quickly in Ottawa as in many other cities. Ottawa’s revenue per available room rose about 102 per cent in 2022 to $108.99. Meanwhile, Montreal hotels posted average revenue per available room of more than $127, up 155 per cent, and Toronto revenues jumped 150 per cent to $149. That’s largely because average daily room rates in Ottawa are cheaper than in bigger centres like Toronto, Vancouver and Montreal. The average room in the nation’s capital cost $178 last year, far below the average nightly rate of $234 in Vancouver. Toronto ($220) and Montreal ($205) also cracked the $200 barrier. Gallagher said cheaper rates could actually be a competitive advantage for local hoteliers. Ottawa “might be able to attract the leisure travellers who can save a few (hundred) dollars on a three-night stay and come into the city,” he said. “(Tourists) ought to be the focus. You can’t entice business travel, you can’t entice larger groups to come just because of pricing if they’re not geared up to do that yet.” Ball said Ottawa’s rate increases, while not as dramatic as in some other cities, are just the tonic the industry needs right now – especially properties that had to take on additional debt earlier in the COVID-19 crisis. “Once occupancy bumps a little bit more, it’ll help hotels to get back to profitability,” he added. Looking further ahead, Ball sees a bright future for the local sector. Three new Marriott-branded properties developed by Montreal’s Rimap Hospitality are slated to open downtown next year – the AC Marriott on Rideau Street, the Moxy on York Street and the Marriott Renaissance on Slater Street. The new builds will add about 660 rooms to the city’s total of more than 11,000 suites. Ball said that will more than offset the loss of inventory from downtown properties that closed during the pandemic. “The hotel business is kind of like the golf business,” he explained. “You don’t turn a dollar until you open, and to get to the stage when you open, you have to invest a lot of money. It shows great confidence in our marketplace, and it helps replace a number of rooms that we lost that were converted to long-term rentals. That’s really exciting.”