Canada’s hospitality industry turns cold again as COVID-19 cases surge

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Chairs are stacked outside a bistro as the Quebec government has ordered all restaurants, bars and casinos to close for 28 days effective midnight September 30 as COVID-19 numbers continue to rise in Montreal, Quebec, Canada September 29, 2020.

CHRISTINNE MUSCHI/Reuters

The hospitality industry has hit another rough patch as bookings tumble and virus cases surge in several cities, signalling a rough winter ahead for many of the companies hit hardest by the COVID-19 pandemic.

During the week of Sept. 13 to 19, occupancy at Canadian hotels dropped 53 per cent from a year ago, the worst reading since late July, according to data provider STR. In tandem, the aviation sector is suffering again. From Sept. 5 to 11, the number of domestic flights was 21 per cent lower than just four weeks earlier, Statistics Canada estimates.

New restrictions on the restaurant industry will bite as well. The Quebec government on Monday ordered bars and restaurants in Montreal and Quebec City to close for most of October as the province tries to fight back a second wave of COVID-19 cases, limiting those establishments to delivery and takeout orders. Ontario is also restricting bar hours, but faces mounting calls to take more decisive action over a surge of virus cases in Toronto and Ottawa.

All told, it appears that momentum has evaporated in Canada’s hospitality industry, after a period of steady improvement during much of the crucial summer season. With many provinces now in a second wave, and with restrictions more likely to strengthen than ease, the industry is facing a prolonged chill that will last into 2021.

“We don’t anticipate [business] conditions getting any better,” said Susie Grynol, president of the Hotel Association of Canada. “In fact, we think they could get worse over the next six to eight months, which means that we’re not even halfway through this” crisis.

After the pandemic forced lockdowns in March, the hospitality industry was hit especially hard. The national hotel occupancy rate ebbed to 12 per cent in early April, from around 60 per cent two months earlier. From February to May, the number of payroll jobs in accommodation services plunged 60 per cent, compared with an 18-per-cent drop for the entire job market. The aviation industry lost billions in revenue and cancelled thousands of flights, while restaurants had to rely solely on takeout orders.

As the economy reopened during the summer, a tepid and partial recovery took hold. The hotel occupancy rate rose above 40 per cent in August, with British Columbia emerging as a standout region. Airlines reinstated flight routes and companies rehired some workers, with many tapping into a government program that subsidized the majority of employee wages. Restaurant patios were often teeming thanks to stellar weather.

Still, consumer activity in hospitality came nowhere close to a full recovery. “Most people stayed off the grid this summer,” said Ms. Grynol. “As we roll into the fall, whatever occupancy we got this summer, we are seeing that start to pare away.”

It’s “very typical” for travel to subside with the end of summer and school back in session, said Vivek Sharma, chief executive of the Fairmont Hot Springs Resort in the Kootenay Rockies area of B.C. The trouble, he added, is that business travel and conferences are no longer there to offset the loss of vacationers.

“There’s no corporate business to be had right now,” Mr. Sharma said, adding that’s a bigger hit to hotels and event spaces in urban centres.

Indeed, big cities are where activity has dried up. Montreal, which has seen some of the worst virus outbreaks in the country recently, had a hotel occupancy rate of 20 per cent in mid-September, the worst for a major market, STR said.

The weakness extends to Montreal’s restaurant industry. In-seat dining has been slower to recover in Montreal than in other large cities, according to data from the online booking platform OpenTable. On Monday, diners at Montreal restaurants were down 81 per cent from a year ago – a figure that will drop to 100 per cent on Thursday, the first day of mandated closings. Toronto has likewise seen a slowdown since Labour Day, along with temporary closings at restaurants tied to virus outbreaks.

The end of summer has brought a chill to airlines as well. The International Air Transport Association on Tuesday said 2020 passenger traffic is set to decline 66 per cent, worse than a previous estimate of 63 per cent. “August’s disastrous traffic performance puts a cap on the industry’s worst-ever summer season,” Alexandre de Juniac, IATA’s director-general and CEO, said in a statement.

The situation is also raising fresh concerns about corporate finances. While the federal government has used a variety of new programs to support businesses through the pandemic, last week’s Speech from the Throne said that direct assistance would be provided to the “hardest hit” industries, such as tourism and restaurants. There were no additional details on what those supports could look like.

“Liquidity and cash availability – the challenges around that – just keep getting bigger and bigger,” Mr. Sharma said.

Ms. Grynol is pushing for several forms of assistance, including expanded access to wage subsidies and credit programs, along with some debt forgiveness.

“If you have no way of making revenue, then you can’t pay your bills. So fixed costs become the preoccupation,” she said.

“That is where we need support from the government during this interim period. We’re not allowed to recover like other businesses can.”

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