Cost of doing business got pricier — for everyone
The Union Bank Inn has weathered its fair share of adversity.
Co-owner Shelley Klein has managed the hotel’s day-to-day operations for 20 years and has helped guide the hotel, nestled in the heart of downtown Edmonton, through a number of global events, including the 2002-04 SARS pandemic and the 2009-10 H1N1 pandemic.
At one point, construction along Jasper Avenue left a giant hole in front of the 40-room hotel for two years. They managed to survive.
None of those things affected business the way COVID-19 has.
“You keep surviving these things, but this is something all its own,” says Klein. “Who’s experienced anything like this? Other than maybe our grandparents.”
On March 15, when Alberta declared a state of public health emergency in response to the COVID -19 pandemic, demand for hotel rooms seemingly evaporated overnight, said Dave Kaiser, president and CEO of the Alberta Hotel and Lodging Association (AHLA), which represents approximately 80 per cent of hotels in the province.
“We immediately saw occupancy fall through the floor in March when it happened and it didn’t take long before up to 90 per cent of the staff were laid off in hotels across the province,” he said.
In April, hotels in Edmonton averaged 11.6 per cent occupancy rate — including a 4.8 per cent occupancy downtown — compared to 59.6 per cent this time last year. The occupancy rate does not include any of the hotels that closed temporarily.
Rates were also slashed.
The price of the average room in April was $93 compared to $129 in 2019. In the first week of June 2020, occupancy levels in the city rose slightly to 19 per cent, compared to 60.1 per cent this time last year. The average rate climbed to $98 compared to $125 in June 2019.
“We’re going to be an industry, quite frankly, on life support for some time,” said Kaiser, a sentiment widely shared within the industry.
“There is no profit. All we’re trying to do is make it through the other side of this. It’s not about making money, because nobody can be making money right now in this business.”
Several of the larger hotels plan to reopen July 2, including the Fairmont Hotel Macdonald and the JW Marriott, while others like the Chateau Lacombe and the Edmonton Inn are accepting reservations for July 7 onward.
The pandemic not only crippled hotels, but Edmonton’s two conference centres — the Edmonton EXPO and the Edmonton Convention Centre were heavily impacted when they closed their doors March 16. In 2019, the two buildings hosted more than 780 events. This year, they’ve already been forced to cancel 200 events, including smaller and private events — such as weddings — and 40 graduations.
Summer festivals and large sporting events, including the Hlinka-gretzky Cup and the ITU Triathlon Grand Final, have all been cancelled and/or postponed, resulting in a loss of tens of millions in economic and tourism-related revenue.
“We know there is a significant loss for this summer festival season,” said Tammy Forbes, with Edmonton Tourism. “With travel restrictions in place, we know the focus will be on local and regional visitors first.”
The hospitality industry has been lobbying the federal government to extend the $73-billion Canada Emergency Wage Subsidy, which was set to expire in the first week of June, then extended to Aug. 29. Business owners say it’s simply not enough.
“Thankfully, they extended it ... but this isn’t a short-term thing,” said Klein. “This is going to be a long, painful process.”
Katy Ingraham, co-owner of
Edmonton’s Cartago restaurant and Fliesch, a deli and coffee shop that opened its doors for the first time earlier this month, says many businesses won’t survive without an extension of the wage subsidy.
“The commercial eviction ban was a hugely welcome, well overdue announcement from the provincial government,” said Ingraham. “But I think once the wage subsidy goes away, it’ll be a bloodbath.”
One aspect driving expenses for hotels and restaurants is the added cost of supplying personal protective equipment (PPE) and enforcing strict cleaning measures.
Restaurants Canada estimates the average 80-seat restaurant will spend an extra $19,020 a year in added safety and health supplies, and could be facing more than $90,000 in losses and between 17 and 35 months to return to positive cash flow.
“With an industry that operates on absolutely razor-thin margins, to be operating with increased costs of doing business, with having to provide PPE and be able to properly sanitize … it’s such a balancing act,” said Ingraham.
The hotel industry is no different. Klein says the amount of PPE required to operate a hotel is “just overwhelming ” and carries a “tremendous cost.” It’s also not easy to come by.
Business at the Union Bank Inn is trickling back, says Klein. An adjoining restaurant, Madison’s Grill, was almost fully booked for Father’s Day weekend.
Predicting when things will return to normal is proving difficult. Klein says some clients anticipate travelling again in September, while others won’t travel until there’s a vaccine available.
One thing ’s for certain — the way businesses in the hospitality industry operate has likely changed forever.
“Obviously, some of these things are going to stay with us and some aren’t,” said Klein. “You have to reinvent yourself a little bit, throughout all these changes and the changing market. For us, we’re thinking about costs and where can we eliminate a cost. So everybody is just rethinking, and evolving.”
I think once the wage subsidy goes away, it’ll be a bloodbath. We’re going to be an industry, quite frankly, on life support for some time. There is no profit. All we’re trying to do is make it through the other side of this. It’s not about making money, because nobody can be making money right now in this business. Dave Kaiser, president and CEO, AHLA