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This article was published 4/8/2020 (314 days ago), so information in it may no longer be current.
It’s not a comfortable time in the hotel industry.
With vacations, conferences, and conventions delayed or cancelled altogether, hotels big and small are suffering through a historically difficult moment. CBRE has predicted that revenue per room will drop by 50 per cent this year, and insiders anticipate it could take at least three years before the hotel sector bounces back.
There’s a lot of pressure on even the most established inns and chains to stay afloat. Imagine opening a new hotel right now. Anupam Kothari doesn’t have to imagine — last week, the Kothari Group opened Canada’s first Hyatt House hotel in the Seasons of Tuxedo.
The 135-room hotel had a small ribbon-cutting ceremony on July 23 after a few months of delays, and on the first day, the hotel had about 25 per cent of its rooms filled. A normal, pre-COVID-19 projection for profitable hotel occupancy is about 70 per cent, and the break-even point is generally half.
Climbing back to those levels could be arduous, but Kothari said he felt confident the hotel would be here to stay.
"Hospitality has been very badly hurt in this time, but we see signs of life in the market," he said. "There’s a lot of pent-up demand."
The Hyatt House’s brand and business model could give it an edge: the upscale hotel has 80 "apartment-style" units with full kitchens that are designed to accommodate extended stays more so than quick jaunts. There’s also a 900 square-foot gym, full swimming pool, and a patio with barbecues that can be booked, and 3,000 square-foot meeting rooms. Plus, a 24-hour market and bar.
At a certain point, corporate travel will begin to pick up, and Kothari said the suites and booking ideology were developed in part with that clientele in mind: a Very Important Resident program is available for guests with 30 or more consecutive nights, and includes perks like complimentary grocery shopping. Nightly rates range from $139 to $199, and can be negotiated based on frequency for long-term guests.
"The inherent demand for longer stays is there," he said. "It’s a full-service hotel, but it feels like home."
Scott Richer, the vice-president of real estate and development for Canada for Hyatt Hotels Corporation, said that though there are challenges ahead, the extended stay model tends to perform well in good times and bad. Richer said Hyatt has opened three Canadian hotels in the last three weeks, with more on the way, and that an increased interest in intra- and interprovincial travel could bode well for those properties.
"We have no choice but to be optimistic," he said. "We’re confident we have well-designed, thoughtful brand offerings, and we’ve put them in strong locations with strong operators."
Location will also be key for Winnipeg’s newest hotel: when the Kothari Group started negotiating years ago to purchase the land, the area had a lot less nearby: the popular Outlet Collection Mall had only just opened, and dozens of restaurants and retailers had yet to begin operating.
"We think with all of the development in the area, from seniors housing, to condos, to the outlet mall and restaurants, it’s become a very good place for what we call an upper scale hotel," Kothari said.
The land was purchased for $2 million in 2018, and the entire development cost $25 million. It took 24 months to build, and was designed by Otto Cheng Architect Incorporated, a Winnipeg-based firm. Most furniture is sourced from Defehrs, and all sub-trades involved in the construction were local.
After the Hampton Inn at the airport, the Hyatt House is the second hotel the Kothari Group has developed in Winnipeg.
Kothari said there will be a number of challenges to consider as the hotel picks up steam, including the heavy burden of property tax, which for a hotel this size could run $300,000 or higher on an annual basis. He also said the wage subsidy program, while helpful to hotels that existed before COVID-19, wouldn’t apply to the Hyatt House.
"For the next 18 months, it’s really about having a steady hand," Kothari said. "We have to keep our costs low, and our business plan is prepared for a two-year-long haul."
"We feel it could be until 2022 that business returns to somewhat normal, but we’re seeing signs of life," he said. "In March, I’d have been absolutely ecstatic about 25 per cent (room use)."
Kothari said many business class or corporate class visitors, in addition to general travellers, are likely holding off on taking trips due to self-isolation requirements, confidence concerns, and more conservative spending.
"Manitoba has handled COVID really well, and that’s paying off for business here," he said. "But there’s still some time before (business) gets back to normal."
Ben Waldman covers a little bit of everything for the Free Press.