Hotel News Notes – Summer 2023 

1. A Taxing Issue – property tax “sleight of hand”! 

2. The Economy and Sales are heating up but expectations are still an issue. 

3. Does your flag’s central booking agency REALLY KNOW your hotel or are they unknowingly 
hurting your hotel. 

1. TAXING ISSUE! 

Hotel Work is Taxing? --- No ---- Hotel Work is Fun and Enjoyed by Hospitality Employees!!

Taxing Hotels is Work? --- Yes ---- when Property Taxes don't take into account occupancy, fairness and frankly the very survival of hotels!!

Here's a tale of two small cities who's names I'll leave out for obvious reasons.

First City - Population between 10,000 - 15,000. The hotel was originally assessed close to the hotel's original value. $12 million +/-. The assessment for property taxes was cut about half to approximately $5.5 million. But the property taxes were only reduced from $268,000 to $230,000 based on an upward mill rate adjustment. Result only a 14% tax reduction against a 55% assessment reduction. Result - still a continued subsidy by the owner for this occupancy troubled hotel. (There is a civic backstory that provides some justification - but it is somewhat a "tit for tat" scenario that doesn't really help the long term for either party.)

Second City - Population between 15,000 - 20,000. The original assessment was close to the hotel's original
value at $10 million +/- The assessment was cut in half. So far so good. Except they changed the zoning for
the property and taxes were reduced by only a small amount
. And, the owner who applied for the
reassessment found that his property taxes were nearly 2.5 times his comparable competition.

In one of the above instances, each room in this hotel (over 100 rooms), the property tax portion of the room, occupied or unoccupied was almost $5 per room per day ($4.76). Therefore when running at 30% occupancy it equates to a property tax of close to $16 per occupied room. With a rate of only $122 that $16 exceeds the GST of $6.10 by almost $10. - WOW!

I've never been strong on unions but this is one area where we need a "hoteliers unite" campaign to bring reality into the situation. As a past (small town Mayor), I certainly understand the reluctance of civic administrations to cut their budgets but when their municipality's businesses are suffering through the tough times of the past Covid pandemic and in Alberta and Saskatchewan's the oil and fossil fuel industry collapse, those town and city governments have to help bear the brunt. A relatively simple solution would be to tie property tax against occupancy.

2. THE ECONOMY - HOTEL SALES VS EXPECTATIONS!

Current Market and the Economy - My Prediction - we will not have a recession! 

At the CHIC conference this year CBRE/Cushman Wakefield forecast trading volume up to $2 billion. Are we doing our part in Alberta and Saskatchewan?  Mid-year indicators suggest we might be. Personally, I have five parties vying for several hotels here in Alberta and Sask. We have had three offers on a large (over 125 room) money losing hotel with a  phenomenally low price per door/key value (under $30,000 PPK) value which just needs the right operator. 

He, she or they have to be:
     - flexible as to use 
     -good at marketing 
     -tight fisted money managers. 

The best buyer would be an alternative use owner. But if not, the right "on-site" owner operator will be needed.

Two flagged hotels in Calgary that my associates and I have shown to various parties for the past 4-5 years have a conditional sale or are sold. Recent Eastern hotelier purchasers felt the properties were over priced by about 25%. However the actual buyer paid all of that extra amount. Of 1he 85+ hotels that we track, another 11 are sold or are conditional at this time.

Purchasers that I am dealing with are engaging in serious conversations and then flying out to check properties. We have not seriously seen that in several years, from even before the Covid hit.
The issue - We just have to show how the hotels that are not producing at Ontario or BC levels but have ADR and RevPAR picking up are then are often not being offered at the expected distressed prices. It's an educational process.

Recession: This much talked about (promoted?) possibility, I think or at least strongly hope, it is not coming.
The well curated Economist put the issue in perspective. Normally, short term interest rates are lower than long term interest rates. Why ---- in general, in the short term our risk is lower than in the longer term investment horizon.

When these are inverted - ie when Short Term Interest rates are HIGHER and long term interest rates are LOWER, virtually every time it shows that we are headed to a recession. However, this time the prospect, at least in the US and I think even moreso in Canada, is that even with some additional interest rate hikes, inflation is being brought under control and therefore a "soft landing" with lower interest rates may well be in order. 

Jamie Dimon of JPMorgan Chase the BIGGEST bank in the US and by far the most valuable in the the world (capitalization of $435BN) , "skips over the banking mini-crisis as mostly resolved" (remember the Silcon Valley Bank scare) or the risk of recession "it could be mild or maybe not".  Either way he worries more about Ukraine and food security in Africa.  (Source The Economist July 15, 2023)

As usual, if you put all the economists in a straight line, they would still all point in different directions!!

3. CENTRAL BOOKING ISSUES!

Watch out! But There's a solution!  

In the past year or so, I have encountered a couple of issues that drove me nuts as I'm sure it did to other travellers and tourists.

Issue 1. I was staying at a conventional 3 star flagged hotel relatively near the airport in a major Canadian city (ok-Ottawa). I called to book a room and ended up having to do so through the central booking in a city in the US. I specifically asked if there was an airport shuttle service. Central booking assuredly said there wasn't one. After a 12:15 AM landing, I took a cab to the hotel. (Not a big deal but $35 bucks just the same.) Upon checking in I asked the staff why they didn't have a shuttle service. "Oh, but we do have a shuttle service. It operates 24 hours. Didn't you know?" was the response. Happily they refunded the charge but the problem highlighted the relative ignorance about specific hotel locations and their services or lack thereof at the central reservation center. Too often when central booking staff do not know about services or benefits, it is much easier to say a quick, simple "No, that service/benefit/feature isn't provided" rather than doing the small amount of research to find out.

Issue 2. Again, I was forced to go through to the central booking center in the US for a Canadian reservation.
After the booking took place, I was asked if I would like to listen to a recording of the brand's promotional program and thereby secure some hotel loyalty points. "It'll only take 5 minutes!"   Therefore I agreed.

So far so good - I can put my phone on speaker and continue other activities while listening to the promo. However, I was put through to a live person and I could tell immediately the promo would entail a back and forth conversation. I demurred stating that I didn't have time for that conversation. The individual, instead  of graciously "wishing me a good day", simply hung up without another word. No “have a nice day” or “thanks for reserving and staying with ****  Hotels” or even a simple “thanks for calling”.  Again no big deal but very very poor customer relations from the US central reservation.

Issue 3. The last example took place in Las Vegas where the company owns quite a few hotels. This was one of their older ones that was hosting an event. I inquired about the room condition and was told that all rooms, hallways etc were renovated. They definitely weren't ALL renovated. I ended up with a sub-standard room with tired carpets and older fixtures. They did make some adjustment but again, central agency booking vs a direct call to the hotel front desk by me would have clarified and probably satisfied the situation.

Solution: I know that central booking takes a lot of work off the local hotel and most of us, for simple bookings are happy to deal with the central booking staff. BUT by prominently providing the hotel's local number, guests are able to secure the correct information from the specific hotel. AND you can keep guests much happier.

And to my friends from the hotel franchise companies, you might want to check how your central booking office handles those detailed inquiries here in Canada.


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Tim Anderson

Tim Anderson has built an extensive network of resources necessary to provide high level commercial real estate services to his clients. He has been in the business for more than 30 years.

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