Hotel rates in Canadian cities expected to rise

By Joakim Johansson, Vice-President, Global Business Consulting at American Express Global Business Travel

Across much of the world, the hotel industry is seeing business and leisure booking volumes growing, with demand balanced by a healthy construction pipeline, keeping hotel rates mainly stable. Other factors that impact on conditions in the hotel sector include the rise in popularity of non-traditional accommodation options, and international trade tensions impacting economic outlooks.

The Canadian hotel industry in particular is on an upswing thanks to relatively strong economic performance, slowing capacity growth, a low Canadian dollar and record-breaking tourism numbers. In 2018, Canada hosted 21.13 million tourists, the highest number on record.

According to the American Express Global Business Travel (GBT) annual Hotel Monitor report, which forecasts room rates and explores key trends shaping global hospitality, hotel rate rises are expected in the majority of Canada’s largest cities in 2020 – including Ottawa (2 per cent), Vancouver (3 per cent), Montreal (4 per cent) and Toronto (4 per cent), providing a positive outlook for the industry the foreseeable future. Canada’s expected rate rises are deemed enviable amongst hoteliers, asin most cities across the globe a full hotel development pipeline means rates will remain modest or stable. But what does this mean for the hotel industry?

Specifically,Toronto is one of the top three cities across North America (along with Chicago and San Francisco) that will see the biggest increase in room rates in 2020. Overall hotel supply and demand in Toronto has resulted in 40 hotel construction projects currently underway, which will add more than 5,200 rooms to the area. Once these hotels are operational it will mean more competition for business in the market, making it more important than ever for hotels in the city to ensure they’re meeting the evolving needs of both business and leisure travellers to stay competitive.

In Vancouver, the rise in room rates can be attributed to the expanding economy paired with the city’s various initiatives to manage the expansion of Airbnb, including last year’s rule restricting Airbnb rentals to principal residences and the requirement that operators be licensed – a first for Canada. This indicates significant opportunity for hotels to capture those who might gravitate to a short-term rental by offering more informal and flexible environments, which we’re seeing more hotels implement.

Beyond room rate forecasts, the Hotel Monitor 2020 also identifies trends that will immediately impact the hotel industry in 2020, driven by shifts in traveller expectation and new technology applications, among other factors.

Emerging technologies are improving the overall traveller experience

Technology is one of the key trends drivingchange across every area of corporate lodging. Many hotels will harness new technologies, processes and performance metrics to optimize tasks that were previously done manually – from self-service kiosks to online check-in via mobile apps – to cut down on operational expenses and drive savings, which in turn has the potential to decrease rates.

The hotel industry is also turning to emerging technologies like Artificial Intelligence(AI) and augmented reality to help address increased market competition and improve the overall traveller experience. AI plays a role throughout a guest’s journey: before they even book, they can visualize hotel rooms through augmented reality; once they check in, they can use facial recognition and during their stay, be looked after by robot-concierges who respond to voice-activated commands. AI allows hoteliers to meet the modern business traveller’s need for personalized service: using pattern recognition, hotels can anticipate guests’ requirements and provide more responsive service. Moving in to 2020, we’ll see business travellers continue to expect more personalized services and anticipation of their needs. As a result, hotels can continue to closely review traveller data to determine trends that can indicate opportunities for harnessing technology to provide additional services and options.

New hotel formats are re-shaping hospitality, worldwide

For several years, GBT has been charting the rise of the modern business traveller, who wants a more informal, flexible and digitally smart environment to work and rest. Hotel providers, both big global groups and more local chains, are responding to this need with new lifestyle hotel formats or serviced apartments. These properties offer shared working spaces and a less formal environment than might be found in more traditional corporate travel hotels. As we see more business travellers extending their business trips to encompass leisure time, creating an environment where they can feel comfortable extending their stay to encompass both elements of their trip will benefit hotels as this trend continues.

Tighter cancellation policies

In response to relatively high cancellation rates often associated with online travel rate bookings or re-shopping tools, many hotels have strengthened their cancellation policies, such as introducing 72-hour advance notice requirements.These new policies are meant to reduce the impact of no-shows and open up more inventory to generate revenues, but they do not support many companies’ travel patterns. As a result, hotel groups should expect buyers to negotiate for more favorable cancellation policies during the upcoming RFP process.

Overall, the preferences of modern business travellers are continuing to evolve. They want hotels to indicate an understanding of their expectations and demonstrate a drive to meet them. As a result, as hotels are working to strategize for 2020, they must be mindful of these changing, “consumerized” needs in order to capture this important audience.