VANCOUVER — There isn't that much damage to the Alberta economy relative to the headlines regarding oil's devastating impact, Ian Glassford of Servus Credit Union told hoteliers in Vancouver Oct. 20 at the Western Canadian Hotel and Resort Investment Conference.
At least not yet. Next year may be a different story, he said. Oil hedges expire right about now. Alberta had an employment cushion in 2015 as companies tried to hang on to their employees — in 2016 they won't be able to avoid the layoffs, and severance packages will start to run out. While Phase I infrastructure will be completed, other phases will be in a holding pattern, probably for quite some time. “It was slow going in; and it will probably be slow coming out again,” Glassford said.
But history has shown that Alberta has found its feet in other periods of weak oil prices. The 1980s were not pretty, but partway through that decade, the GDP started to move back up again.
On the positive side, over the last several years Alberta became too expensive, companies had trouble finding employees and they couldn't afford the cost of construction trades. Historically, down cycles have pushed Alberta to diversify.
The U.S. is in a stumbling but steady recovery — increasing the potential tourism from south of the border. The weak Canadian dollar is helping boost U.S. tourism and is also helping the lumber industry. The weak Canadian dollar is unlikely to rise as long as we have low oil prices, since many countries view our dollar as a “petro dollar” inextricably tied to oil.
Glassford ended his presentation by exhorting delegates to buy low. To buy low, prices have to fall. For prices to fall, you need fear. And to get fear, things have to go wrong.
In extended good times, assets get overpriced and create poor long-term returns. Don't miss the opportunities when dealing with today's problems.
The conference, held at the Hyatt Vancouver and produced by Big Picture Conferences, attracted a record 275 attendees including hotel owners, operators, financiers, consultants, architects and more.