By Troy Taylor, VP Strategic Partnerships and Marketing, Foodbuy Canada
There is no question that we are facing an uncertain year ahead and the hospitality sector is adjusting to the new realities. In a recent podcast that I participated in with Tony Elenis, president of the Ontario Restaurant Hotel & Motel Association (ORMHA), I was asked what to expect in 2025. The phrase I used then was, “2025 is going to be a bumpy ride.” I don’t see anything to change that opinion. With Prime Minister Trudeau now stepping aside, this has provided some with the renewed optimism that comes with change. Then again, what is in store via “the Trump effect?”
With the economy projected to continue with lower growth and higher interest rates, this directly affects consumers’ disposable income and businesses' operating costs. This softness will apply pressure on both the supply and demand sides of the equation.
What does this mean for the hotel sector?
If the Bank of Canada remains stubborn on rates, the result will be slower investment in new builds, expansions and renovations as projects face higher financing costs. International investors may also pause before committing to Canada. This could put pressure on the supply side, where Canada is already behind pace in keeping up with room demand. I have had the chance to speak with most of the provincial hotel association leaders and they all indicated more rooms are needed, right across the board.
The optimist in me would point to a recent Financial Post article by real estate reporter, Shantaé Campbell, where she writes: "Marriott International Inc. has dozens of new hotels in its Canadian pipeline, while Hyatt Hotels Corp. is set to more than double its footprint with 23 new locations by the end of 2026." This is good news. We know the pandemic paused many new builds and major renovations, meaning the efforts to catch up are ongoing.
Hotels usually set aside reserve funds for investments on five to seven-year cycles. Higher borrowing costs are forcing some operators to conduct renovations on a piecemeal basis. The challenge with that is being able to deliver a consistent guest experience, plus it is not necessarily cost-effective.
Inflation will continue to cause issues with energy prices and labour costs, and we can expect supply chain disruptions. To compound this, hotels are facing price sensitivity from travellers. While demand in some areas is returning, hotels may need to increase rates to offset rising costs. However, they must balance rates against price-sensitive consumers.
RBC's latest Consumer Tracking Report reveals that: “Canadian consumers are tapped out." And that recent retail spending is "nothing short of abysmal." These consumer cutbacks are also being felt hard across the restaurant sector and ultimately this will impact hotel F&B operations.
Additionally, most hotels have already adjusted their rates, capitalizing on the post-pandemic splurge and to better reflect comparable pricing to similar North American markets. If you have travelled recently, you will have likely experienced sticker shock. This means that pulling the price lever in 2025 will become a little more difficult.
The continued resurgence of domestic travel
Domestic travel has been a lifeline for the sector due to lingering uncertainties from international travellers, compounded with higher airfare prices. Hotels can adapt by offering experiences tailored to regional tastes and promoting destinations that are less dependent on international travellers. Hotels should develop packages that highlight unique experiences and draw attention to local attractions to encourage weekend stays.
Give me an “experience”
Guests are also increasingly seeking authentic travel “experiences” that allow them to connect with local culture and communities. Hotels that collaborate with local artisans, guides, and chefs offering immersive experiences and activities such as cooking classes, cultural tours, and local art displays will be ahead of the curve.
Increased focus on sustainability and health
Leaving the whole Carbon Tax issue aside, travellers are increasingly prioritizing eco-friendly accommodation. Hotels will need to continue to invest in greener technologies and services to meet the needs of eco-conscious travellers.
The planet’s health goes hand in hand with our personal health. Hotels that focus on mental, physical, and emotional well-being will lead the pack. Wellness amenities including yoga studios, spa services, nutritious dining options, sleep-focused rooms, and even mindfulness programs are all on the rise. The emphasis should be on creating a “holistic wellness environment” that supports the planet and guests' health during their stay.
The Rise of bleisure travel
Working remotely and working-from-home is here to stay. This allows consumers to take advantage of flexible work schedules to explore new destinations. Hotels need to adapt by combining business amenities like high-speed internet and smaller meeting rooms with leisure activities such as local tours or wellness offerings. This is now about embracing the new reality of hybrid leisure travel.
How can hotels brace for tougher times ahead?
Increasing operational efficiency will be critical as hotels deal with rising costs. Investment in technology, such as energy-efficient HVAC systems, automated check-ins, and AI-powered booking platforms, can help reduce overhead costs while improving guest satisfaction.
Additionally, streamlining staffing and training employees to handle multiple roles can help mitigate labour shortages. At Foodbuy, we are helping operators look across the whole supply chain for optimization opportunities to drive cost savings. Operators should look to leverage purchasing expertise to keep costs in check and to be abreast of the multitude of new products hitting the marketplace.
Personalization is coming at us from everywhere and will be a tool for boosting guest loyalty. Offering things like contactless check-in, in-room smart controls, and tailored guest services can enhance the guest experience.
If you haven’t dealt with an AI concierge yet, you will soon. AI companies have created life-like bots to respond with highly tailored answers to specific guest inquiries about the hotel or surrounding area/activities. They also incorporate guest-related information like reservation status, loyalty memberships, booking sources, etc. A new age is dawning!
“Technology may be influencing every aspect of everyday life, but it’s not a replacement for personal service and human-level hospitality. Hotels have to approach every investment and enhancement by examining what excites their guests, what inspires their employees, and ultimately, what will drive revenue for their business”. – “Hospitality in 2025: AUTOMATED, INTELLIGENT… AND MORE PERSONAL” report from Skift & Oracle Hospitality.
While 2025 will pose significant challenges, there are opportunities for hotels that are agile, innovative, and responsive to these market dynamics. By keeping an eye on these trends combined with strategic investments, the hotel sector can successfully navigate the tough times ahead and emerge stronger through 2025 and beyond.
About the author
Troy Taylor is a 30-year veteran in the foodservice, hospitality and retail sectors where he has held senior roles with Labatt and PepsiCo. Taylor also helped serve the industry through Restaurants Canada where he played a key role in helping operators survive through the pandemic, one of the most trying times in the history of the foodservice industry.
Troy currently manages Foodbuy Canada’s publications that provide actionable insights and purchasing solutions and cost-saving innovations to over 20,000 hospitality and foodservice operators across the country. Foodbuy Canada is a Compass Group Canada Company.
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