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Vancouver hoteliers pursue growth despite recession fears

Strong leisure demand drives expansion plans across North America
Vancouver-based Coast Hotels added five properties to its portfolio in 2022, including the Coast Calgary Downtown Hotel & Suites by APA. It's now looking Stateside for growth opportunities | Image: Coast Hotels Ltd.

Pent-up demand for travel is fuelling hoteliers’ growth plans despite ongoing fears of a recession in 2023.

This week saw the U.S. master franchise agreement for the Coast Hotels brand reacquired by Coast Hotels Ltd. of Vancouver, a subsidiary of Japan’s APA Group. The financial terms of the deal with former master franchise holder Coast Hotels USA, LLC of Seattle were not disclosed.

The deal gives the Vancouver company a portfolio of nine franchised hotels in Alaska, Washington, California and Hawaii, and lays the foundation for its expansion through a new operating subsidiary, Coast Hotels USA Inc.

“The company aims to achieve significant growth through a combination of new franchise and hotel management contracts, mergers and acquisitions and the purchase of hotel real estate in key locations by 2027,” the company said in a press release.

The deal boosts the Coast Hotels portfolio to 29 franchised hotels across North America. It also owns six hotels in Canada and manages a further three properties in B.C. and Alberta.

“We have added five hotels this year in Canada, but for us to realize exponential growth, we obviously need to grow throughout the United States,” said Brigitte Diem-Guy, vice-president, revenue strategies and communication with Coast Hotels. “The biggest opportunity that we see as a business strategy or vision is the U.S.”

While strong pent-up demand from the pandemic continues to play out across North America as social activities normalize – ski hills, for example, are expecting strong traffic this winter now that international borders have largely reopened – the sheer size of the U.S. market makes it the place to be.

“We still have pent-up demand that we see in Canada but also the U.S.,” Diem-Guy said. “It’s quite clear that because of the volume of travel in the U.S. that the U.S. is usually faster to recover.”

While business travel remains at 75% of pre-pandemic levels and isn’t expected to fully recover until 2024, Diem-Guy is expecting the strong recovery of leisure travel to continue in 2023 despite recessionary influences.

“We don’t see any slowdown right now,” she said. “We see strong leisure demand in North America.”

Coast Hotels isn’t the only hotel operator banking on growth.

Northland Properties Ltd., which operates 62 hotels in Canada, one in the U.S. as well as four in the U.K. and Ireland, has aggressive expansion plans.

“We’re going to double our size in eight years,” Northland president Rob Pratt told the Western Canada Lodging Conference in October. “We’re bullish about 2023.”

While pent-up demand among domestic travellers may cool, he pointed to other segments of the market, including international travel and group business picking up the slack.

“Our feeling is that as the domestic/transient cools off, other sectors will increase,” he said.

While rising interest rates and operating costs continue to be a concern, the latest performance reports point to sustained revenue levels.

Revenue per available room averaged $105 per night nationally in November 2022, up 17 per cent versus November 2019. Occupancies averaged 61 per cent, led by Vancouver at 76 per cent.

U.S. figures for November also showed strong growth in revenue versus 2019, averaging US$85.74 a night, up more than 11% versus three years earlier. Occupancies declined 3 per cent, however, to 59.4 per cent.

Western Investor