Read Chapter 3 - Accommodation

Chapter 3 - Accommodation

Key Learning Objectives:

• Explain the contribution the accommodations sector makes to Canada’s economy
• Identify how a hotel category is determined, and describe different hotel categories in Canada
• Explain the meaning and structure of independent ownership, franchise agreements, and management contracts
• Summarize current accommodation trends
• Discuss the structure of hotel operations

Overview

In essence, hospitality is made up of two services: the provision of overnight accommodation for people travelling away from home, and options for people dining outside their home. We refer to the accommodation and food and beverage services sectors together as the hospitality industry. This chapter explores the accommodation sector, and the Chapter 4 details the food and beverage sector.

In Canada, approximately 25% to 35% of visitor spending is attributed to accommodation, making it a substantial portion of travel expenditures.

Hotels

There were 8,090 hotel properties with a total of 440,123 rooms in Canada in 2014. Direct spending on overnight stays was $16.7 billion, and the year’s average occupancy rate was forecast at 64%. Across the country the sector employed 287,000 people (Hotel Association of Canada, 2014). According to go2HR, “with a projected rate of annual employment growth of 1.5 per cent, there will be 18,920 job openings between 2011 and 2020” (2015a).

In order to understand this large and significant sector, we will explore the history and importance of hotels in Canada, and review the hotel types along with various ownership structures and operational considerations. To complete the chapter, we will identify accommodation alternatives and specific trends that are affecting the accommodation sector today.

The History of Hotels in Canada

As we learned in Chapter 2, travel in Europe, North America, and Australia developed with the establishment of railway networks and train travel in the mid-1800s. The history of Canada’s grand hotels is also the story of Canada’s ocean liners and railways. Until the use of personal cars became widespread in the 1920s and 1930s, and taxpayer-funded all-weather highways were created, railways were the only long-distance land transportation available in Canada.

Both of Canada’s railway companies established hotel divisions: Canadian Pacific Hotels and Canadian National Hotels (Canada History, 2013). The first hotels were small and included Glacier House in Glacier National Park, BC, and Mount Stephen House in Field, BC. The hotel business was firmly established when both companies recognized the business opportunity in the growth of tourism, and they soon became rivals, building grand hotels in select locations close to railway stops.

Banff Springs Hotel opened in 1888, and other hotels soon followed, including the Château Frontenac in Quebec City (1893), the Royal York in Toronto (1929), and the Hotel Vancouver (1939). These hotels remain in operation today and are landmarks in their destinations, functioning as accommodations and as local attractions due to their historic significance and outstanding architecture.

Through the 1950s and 1960s, an increase in motor traffic saw the rise of the motel. The word motel, used less commonly today, comes from the term “motorist’s hotel,” used to denote a hotel that provides ample parking and rooms that are easily accessible from the parking lot. Traditionally, these structures were designed with all the rooms facing the parking lot, and relied heavily on motor traffic from nearby highways (Diffen, 2015).

Today, there are a number of hotel types, which can be classified in multiple ways. Let’s explore these classifications in more detail.

Hotel Types

Hotels are typically referred to by hotel type or category. The type of hotel is determined primarily by the size and location of the building structure, and then by the function, target market, service level, other amenities, and industry standards.

Competitive set is a marketing term used to identify a group of hotels that include the competitors that a hotel guest is likely to consider as an alternative. These can be grouped by any of the classifications listed in Table 3.1, such as size, location, or amenities offered. There must be a minimum of three hotels to qualify as a competitive set.

Summary

The accommodation sector, and the hotel sector in particular, encompasses multiple business models and employs hundreds of thousands of Canadians. A smaller, but important segment in BC is that of camping and RV accommodators.

As broader societal trends continue and morph, they will continue to impact the accommodations marketplace and consumer. Owners and operators must stay abreast of these trends, continually altering their business models and services to remain relevant and competitive.

Now that we have a better sense of the accommodation sector, let’s visit the other half of the hospitality industry: food and beverage services. Chapter 4 explores this in more detail.

Key Terms

• Average daily rate (ADR): average guest room income per occupied room in a given time period
• BC Hospitality Foundation (BCHF): created to help support hospitality professionals in their time of need; now also a provider of scholarships for students in hospitality management and culinary programs
• BC Hotel Association (BCHA): the trade association for BC’s hotel industry, which hosts an annual industry trade show and seminar series, and publishes InnFocus magazine for professionals
• BC Lodging and Campgrounds Association (BCLCA): represents the interests of independently owned campgrounds and lodges in BC
• Camping and RVing British Columbia Coalition (CRVBCC): represents campground managers and brings together additional stakeholders including the Recreation Vehicle Dealers Association of BC and the Freshwater Fisheries Society
• Competitive set: a marketing term used to identify a group of hotels that include all competitors that a hotel’s guests are likely to consider as an alternative (minimum of three)
• Costs per occupied room (CPOR): all the costs associated with making a room ready for a guest (linens, cleaning costs, guest amenities)
• Fractional ownership: a financing model that developers use to finance hotel builds by selling units in one-eighth to one-quarter shares
• Franchise: enables individuals or investment companies to build or purchase a hotel and then buy or lease a brand name under which to operate; also can include reservation systems and marketing tools
• Franchisee: an individual or company buying or leasing a franchise
• Franchisor: a company that sells franchises
• Hotel Association of Canada (HAC): the national trade organization advocating on behalf of over 8,500 hotels
• Hotel type: a classification determined primarily by the size and location of the building structure, and then by the function, target markets, service level, other amenities, and industry standards
• Motel: a term popular in the last century, combining the words “motor hotel”; typically designed to provide ample parking and easy access to rooms from the parking lot
• Occupancy: the percentage of all guest rooms in the hotel that are occupied at a given time
• Revenue per available room (RevPAR): a calculation that combines both occupancy and ADR in one metric
• Sharing economy: an internet-based economic system in which consumers share their resources, typically with people they don’t know, and typically in exchange for money
• SMERF: an acronym for the social, military, educational, religious, and fraternal segment of the group travel market