Business continuity a critical issue for hotels

Government has responded quickly, but the effects are uncertain

By Peter Mitham

OTTAWA – Summer travellers typically kick off the summer on May 24, but in many provinces this year, public health orders will prevent them from going too far – and if they do go, they’ll have to do so in family groups. Social distancing protocols require everyone other than immediate family to avoid coming within six feet of anyone else.

This is why Susie Grynol, president and CEO of the Hotel Association of Canada says the COVID-19 pandemic couldn’t have hit Canada at a worse time.

Hotels, particularly smaller, vacation-oriented properties in small towns across the country, typically look to summer to make or break their livelihoods. Coming out of winter, most are cash-poor and should be looking forward to a strong season.

But not this year.

Susie Grynol

“We’re coming at this from a cash-weak perspective,” Grynol said. “The cash position of the individual owners is what’s of greatest concern.”

To date, the federal government has pledged close $93 billion in support for individuals and businesses thrown for a loop by efforts to contain the pandemic. This pleases Grynol, but the real question is how quickly it gets to the people who need it. (Details on the support programs are available here.)

“We’ve been pushing liquidity from day one in terms of making capital available to these small businesses,” she said, noting that small businesses account for 87 per cent of hotel ownership in Canada.

“But the government isn’t a lending institution. They have to rely on the banks in order to apply that flexibility or to deliver those loan facilities to individual businesses.”

She knows not all operators will survive. How many will, however, is unknown.

“There’s no clear answer on how long before these businesses actually become bankrupt,” she said. “It really would depend on where they are, but many of them are worried about it and trying to find every possible solution to try and cut expenses and defer some of these big payments until they’ve got more cash coming in the door.”

HVS Canada managing director Carrie Russell expects most owners to sit tight for as long as possible, cutting costs and hoping public health measures contain the pandemic quickly. Most observers point to the fact that North America is about eight weeks behind China in terms of infections, meaning recovery isn’t likely until midsummer.

“It’s going to get quite a bit worse before it gets better,” said Russell. “We’ve got two months for sure before we start to see things start creeping back.”

The only properties that will move forward in the interim are distressed properties.

Carrie Russell

“No one’s going to want to buy right now unless it’s at a fire-sale kind of price,” she said, noting that a prompt government response has led to a belief that the majority of owners will survive. “From a cash flow perspective, there’s a lot of optimism that hotels will be able to weather through the period.”

But as the pace of sales goes, so goes the pace of investment.

Construction activity will slow as social distancing policies reduce the number of staff in offices and job sites, and the grave uncertainties of the situation will keep many people on the sidelines.

A planned interview with Anatoly Kondratenko, the newly appointed vice-president, development, with Accor Hotels regarding its plans for Canada was called off. According to the publicist, the “constantly and very rapidly evolving” situation with respect to the pandemic meant “Accor is unable to foretell the final business impact.”

Adèle Rankin, principal and global design lead with CHIL Interior Design in Vancouver, was keenly aware of the potential for a slowdown in business but preferred to be optimistic until things become clearer.

“We’re just taking it day-to-day,” she said. “I think all of the renovations or new builds that are underway are still going. I think right now there’s a tremendous amount of retained optimism that this is a period of time and we’re going to have to be there for guests when they start to travel and want to be able to get out there again.”

But no one had a clear sense of when that might be.

“Is it 12 months, is it 24 months? What’s the timeline? We don’t know,” Russell said.