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Straight Talk: Perspectives on Moving the Industry Forward

Rosanna Caira: What are the immediate impacts of this pandemic on Canada’s hotel industry? And how has your company, specifically, been affected through this time?

Heather McCrory: In terms of Canada, this has been devastating for our industry. It’s unprecedented in terms of what’s happened in all of the different hotels and how quickly our business was impacted. [We felt the impact] faster than any other industry and for our company, specifically, about 30 per cent of our hotels are open, the others are all closed. And, for the hotels that are open, in some cases they’re housing various people on the frontlines, but in other cases, it’s just a smaller occupancy. So, it’s been a devastating situation for the industry.

Don Cleary: It’s a similar story to what Heather has described. [Since] 90 per cent of the countries in the world have travel restrictions, that’s obviously resulted in severe dramatic downturns in both air travel and hotel occupancies. and Canada is no exception. We have 30 per cent of our hotels closed, so 70 per cent remain open. We met with every owner, went through what a closed scenario would look like. [A recent] STR report showed the overall occupancy in Canada was 13 per cent for the industry. All hotels are running low occupancy right now and we’re seeing the large, big-box, urban-centre hotels — which we have a lot of — are actually doing lower occupancy than [other segments], because they obviously rely on international customers who come by air. We’re doing better in our select-service and extended-stay hotels —there’s a little bit of a range. For comparison, a year ago in April, we ran 75 per cent occupancy for the month. At those occupancies, most, if not all, hotels are running operating losses, and understand that’s for debt service. It’s a substantial crisis for the hotel community and has resulted in us having to do extensive layoffs and temporary furloughs.

Christiane Germain: We’re the smallest of [the three companies on this podcast] but that doesn’t mean it hasn’t impacted us. On the contrary, it’s especially hard because all of our hotels are company owned. We have 18 properties across the country and we’ve suspended five of them. We made the choice to suspend the operations of the hotels in cities where we had two properties, so we now have 13 that are still in operation. And, of course, they all have single-digit occupancy rates. Most of the people staying in our hotels are from the frontlines. The line of cancellations is crossing the line of reservations as we speak — we have less cancellations and we’re starting to get a few more reservations, especially in Quebec City and Charlevoix, a resort area of Quebec City. So, we can see people are starting to think about taking a couple of days here and there, which is a good sign.

RC: How many staff did you have to lay off?

DC: I don’t have the numbers globally, but our CEO Arnie Sorenson mentioned he thinks more than half of our employees globally are on some level of layoff or furlough. I can tell you, in Canada, at the property level, we’ve laid off approximately 85 per cent of our employees and at our above-property offices we’re at approximately 80 per cent. It’s been significant.

HM: Globally, both numbers are very similar. In Canada, specifically, I would say between 80 and 90 per cent, just because the majority of hotels are closed. I don’t have actual numbers, but a tremendous amount of our colleagues have been laid off in Canada and furloughed in the U.S.

CG: Exactly the same — between 85 and 90 per cent — and it basically happened overnight.

RC: What does the industry need from various levels of government to move forward, perhaps in a quicker fashion, towards recovery?

DC: From my perspective, when you step back from it, we need two things. First of all, we had a very healthy industry before this crisis. The vast majority of hotels were performing well. Then we get slammed with this dramatic drop off — a virtual cessation of business as we know it. You have to look at it from two ways. One is we have to take care of these workers we’ve had to lay off and secondly, we have to provide support to carry through the hotel businesses until we get back to more normal times.

There’s been a lot of effort and laws passed, as we all know, by the Federal Government and some relief from the provincial governments and it’s been good for the most part, so far. For employees, obviously, there’s the Canadian Emergency Response Benefit, which is sort of an enhanced unemployment insurance, which is good, but I think the big win for us has been what they call the Canadian Emergency Wage Subsidy (CEWS), which provides the 75-per-cent relief for all workers, for any business that’s experienced more than a 30-per-cent drop in revenue. Of course, the entire hotel industry more than qualifies, so we’re taking advantage of that, which helps.

The only thing I would say is we need to extend it. It’s scheduled to expire on June 6 and we’re all going to need it for a lot longer than that until we get back to normal [Editor’s note: On May 8, the Federal Government announced the program would be extended to August 29]. And then on the on the owner side, we need support to carry our owners through in terms of their debt service and other obligations. As Heather said earlier, almost every hotel is running operating losses and that’s not sustainable for any reasonable period of time without government support. [There are] some good loan programs, but they don’t provide a 100-per- cent guarantee and we need to get there if we’re going to be able to take advantage of them.

HM: I would echo that extending the CEWS is incredibly important — 12 weeks is not long enough with the way this virus is going. And I would also add that at some point, and not necessarily just yet, we need support for the owners. Then Destination Canada, which is quasi-government, needs to step in and start thinking about what that’s all about, which they are, so that’s moving in the right direction. But that’s the other support that we’ll need coming out the other side.

CG: Yes, they are, but at the same time, with the budget they have — close to $100 million they spend each year across the world to promote Canada, which in ordinary times make a lot of sense — they should be spending more money in Canada, as we speak, to promote the country within the country. And we really need the help as our fixed costs are extremely high. We need help in order to make it through. If nothing is being done regarding our fixed costs, so many of us won’t be able to make it through. As we know, we’ve been the first ones hit and we’re going to be the last ones to get back in business so our governments have to come up with solutions. I don’t ask for solutions that that will last forever, but solutions we can actually modulate. I don’t want to be dependent on the government, but as we speak, because our revenues are so low, we will need the help — I don’t see any other way to come out of this alive.

RC: For your properties that are open, what protocols has your company put in place to ensure guests and employees remain safe while in the hotel?

DC: Almost all of the business that’s going on is COVID-19 related in one way, shape or form, so for right now, we’re dealing with that type of business, as opposed to the protocols we’re putting in place to get regular customers back. The safety of our guests and our associates is paramount and the best way to describe [the current situation] is we don’t want to mix sick people and healthy people in the same building. So, most of the [people] we have in our hotel are caregivers, first responders, people that are self-quarantining and, even in those situations, we’ve modified our protocols to make sure, for those that are what I would call at-risk, we segregate them from other customers. And we have a number of protocols in terms of how they check in, reduced housekeeping, reduced food-and-beverage [offerings] and how we execute it in the safest way.

Our industry has long dealt with viruses in its hotels and has cleaning procedures to address that, so we’ve made sure everybody is following those to the tee. Looking ahead, we’re going to have to build confidence to get the regular traffic back. But, for now, it’s about putting a variety of physical-distancing and servicing protocols [in place] to minimize at-risk people’s [contact] with healthy people. We’ve taken the position that there has to be in a whole-hotel usage. In other words, if the government wants [us to house people], we’re going to say ‘then take the entire hotel’ because we don’t want to mix sick and well people..

CG: We have frontline workers [staying at our hotels] and we have procedures in place. For example, the housekeeping staff won’t go into a room until three days after the guest has checked out and we give our guests bags to put the towels and linens in and leave in the corridor. We’ve changed our procedures in order to secure the guests of course, but also to secure our employees — guests are very important, but the staff is equally important in this situation.

RC: Post-COVID-19, where can we expect to see the quickest rebound in the marketplace?

HM: The domestic market, the leisure market, will be the first to come back, purely through air travel, if nothing else. There’s pent-up demand in terms of people having been in self isolation or sheltering at home, therefore, the local community will have a little bit more of an uplift. But there’s a tremendous amount of work to be done — in terms of testing and the vaccine side of the equation — until the customer is ready to travel. It’s interesting, [in terms of]mentality, because when I look around the globe, each country has such a different approach to this. The U.S. is much more aggressive on travelling and Canadians will be less aggressive. However, the first thing that will come back will be that domestic [market] and it’ll be staycations — going to your local hotel as we get them open and build customer confidence again.

DC: Based on data we’re looking at from previous severe economic downturns, it’s going to be what we call the ‘drive market’ — local Canadian travel —[because] people have a certain amount of cabin fever and they want to get on the road. They’re going to want to physical distance, so resort/golf destinations [will be popular]. In the U.S., I heard some of our desert golf resorts, many of which closed the hotel component, were fully booked with tee times last weekend. The other area that will come back sooner than others is luxury, based on prior downturns. Luxury guests have been hurt, but they still can afford to go to hotels and we’re seeing some of that already in the U.S. in some of our luxury hotels. I’d call that the staycations — people want to get out of their house and be pampered. And, of course, the large-group business will be the last to come back. So, we’re hopeful — Canada has done a very good job of clamping down and being thoughtful about how it wants to plan reopening — we’re going to be able to resurrect some semblance of a good third quarter of Canadian drive, leisure business and uptick during that historically strong period of the year.

RC: With airlines talking about reduced capacity, are you concerned about those restrictions and what that means for your hotels from an international perspective?

DC: It’s going to impact on all of us and that’s why it’s going to take us so long to recover — we’re going to be the last [industry] to recover. The key to that is the vaccine — as long as there’s no cure for the virus — we’re going to have to wait. And, as long as we don’t have the vaccine, it’s going to change international travel if airline companies reduce the number of people they have on their flights, their business model won’t be the same.

HM: The other piece is the regulations coming back into your country — even if you did get on a flight and go somewhere, you may have to go into quarantine for 14 days regardless. So, international [travel] is further away. It’s a longer game — the airfare, the quarantine, the vaccine — all of those pieces are pushing it out there. It’s hard to predict, frankly, but for the next six months, two quarters, it’s really about the domestic and then we’ll obviously all keep our eye on what’s happening internationally. But it’s going to be a longer road for sure.

RC: When things start to pick up, albeit slowly, how will the hotel industry look and what changes can we expect to see in hotels moving forward?

DC: We’re in the process of evaluating all kinds of [scenarios]. [We recently rolled out] a new cleaning protocol and a new global cleanliness council to make sure we’re following the highest hygiene and disinfectant standards, because it’s all about building confidence to get the travellers to come back. Our company has historically had very strict cleanliness and training standards, but we know we have to take it to the next level. At the same time, we’re looking at modifications to how we’re going to operate hotels, certainly in the short term, but some of these changes may very well be permanent. We were on track to have mobile key in all of our hotels globally by the end of 2020, but paused that initiative when this crisis first launched because there are costs to do that for our owners, but that’s probably going to be the first [initiative] to come back. The ramp up of [mobile-key] usage was going fairly well, but we suspect that [anything] minimizing interaction between guests and employees on property is going to be appealing to customers. And, clearly, more physical-distancing procedures, higher cleaning procedures and more-frequent cleaning procedures are all issues we’re looking at.

HM: Accor has put together a program with Veritas — it’s more of an auditing process to ensure every hotel within the core system (more than 5,000 hotels) has a basic minimum. And then each region is taking it to the next level. We also just rolled out our new guest-interaction protocol, whether it be housekeeping, dining or arrival experience. In fact, the entire customer journey, we took every single step of it. And it’s not just about the cleaning, it’s about the number of interactions, it’s how we interact, it’s all those different pieces. We just rolled that out in broad terms to our general-manager group and have engaged all of our owners. Obviously, we all clean our hotels, because we’ve had significant experience with this over the years, but this is taking it to that next level to make sure we’re doing everything possible to keep our hotels as clean and safe as possible.

RC: How does this impact the housekeeping department specifically?

CG: We are reviewing our procedures and won’t be able to afford to wait three days before the person gets into the room to clean. We’re looking at other solutions that will make our guests comfortable, secure and also protect our employees. But my main concern is there will be a cost to all of this. We’re a much smaller company than Accor and Marriott and there are consequences to having to change our procedures as much as we’re going to have to change them. They’re cost related and will the consumer be willing to absorb the costs related to those changes? It’s the same for new technology — we’re going to have to use all these new procedures and I’m questioning the cost. It’s a challenging situation.

DC: We’ve been looking at artificial intelligence over the last couple of years, before this crisis, and how we might modify that to better service our customers relative to the virus and the new normal. I don’t know what we’re looking at, but I do know we’re pursuing the benefit of that in our industry. And I suspect it will be a tool in our box to help transition out of this crisis more efficiently.

RC: Is having staff wear gloves and masks a problem from a guest- perception point of view?

HM: We’ll do whatever the local governments recommend and, in a lot of cases, it’s wearing masks, so we’ll do it. But, beyond that, it also helps the colleagues and the guests feel confident we’re taking it seriously. I don’t have an issue with the masks, gloves or whatever is required in order to control containment or spread. Is it the best thing for our industry? Probably not. We’re normally hospitable; we’re normally in a bit of a different space, but these times call for different situations and we’ll embrace it, make the best of it and [determine] how we can move on.

RC: How are your property’s restaurants being impacted by mandated closures and how do you plan to move forward with them post-COVID-19?

HM: To me, it’s not any different than how we have to look at cleaning a guestroom. We have to look at the same procedures and policies we have today for our food-and-beverage restaurants — spacing people out, people wearing masks. Those are all things that we couldn’t envision before but, of course, now it’s something we have to consider. We’re including our restaurants the same way we handle the hotel. So, masks, gloves, spacing people out, what are we doing for buffets, all of those different pieces are definitely a part of what we’re looking at. Disposable menus is something we’re talking about — it’s all of those touchpoints and anything you can do to decrease the number of touch points is positive in my mind.

RC: Will sustainability still be front and centre with all these changes?

HM: [Accor] will continue to have sustainability initiatives front and centre. It’s part of our DNA and I haven’t seen anything that would indicate otherwise so far, but we’re just working through the F&B side of it. So, no, I can’t imagine it will have a significant impact — whatever we would use would be disposable but not single-use plastics, wherever we can.

DC: Since sustainability is always going to be important in our hotels, it’s important to our customers that we’re pursuing it. Like everything else going on in hotels today, we’ve got to evaluate it to make sure, in this temp- orary state of new normal, of physical-distancing and the use of masks, that everything in our sustainability area makes sense for the foreseeable future. And so, we’ll evaluate, but I don’t doubt for a minute that long-term sustainability will remain a very high priority for us.

RC: Now that everybody’s accustomed to working from home, will that impact the way you look at your business model and getting travellers back into your hotels?

CG: It is a concern, but I’m one of those people that believe we’re doing this now because we don’t have the choice, but when this is over — because one day it will be over — there is value in face to face. And, because of what we’ve gone through, there will be even more demand for face-to-face meetings. The frequency might not be what it was before, but I’m sure it will come back.

HM: I’ve spoken to a lot of our business-travel customers, in terms of the travel managers, and asked this exact question. I was not a fan of Zoom or any of these Skype videos, but now I’m a much bigger fan, because it’s the only way I get any sort of interaction. It’s a useful tool and something we’ll see more of, but there’s nothing that replaces that face to face. You need to get in front of someone to negotiate; you need to talk to someone to really understand what their issues are and what’s going on and [virtual meetings] don’t allow for that. However, I do think this will replace some travel.

RC: What are some of the opportunities to come out this new normal?

DC: Our business is based on relationships and trust with our customers, with our associates and with our owners. There’s not a lot of upside to business that I’m seeing this virus is going to create, but I do think how we handle this crisis, how we support and communicate with them, the transparency we have with them and the trust we can continue to maintain is going to pay dividends when we come out of this.

HM: I thought about this question and was hunting through my brain for opportunities. As Don was saying, it’s not so much about opportunities, but reinforcing what we already know. Relationships, how you treat people — that will be remembered for a long time after this. Sometimes we have short memories, but how we treat people through this — customers, partners and owners — this is something people will remember for a long time. [You have to keep] that momentum and relationship ongoing. It’s going to be very important because these circumstances have forced us into really working together very tightly and we’ll all get busy and we’ll all kind of move on, so for me, the lesson or the opportunity is to remember this and remember how important it is.

CG: Right now, I’m working really hard to make sure that we’re able to come out of this alive. So, there will be lessons learned for sure, but at the moment, my nose is too close to the window to really see them. I’m trying to save my business and make sure my staff, my colleagues and my family are safe. We’re all in survival mode.

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