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The Great Potential of a Growing Downtown

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The Great Potential of a Growing Downtown The Hotel Industry in Downtown Edmonton THE GREAT POTENTIAL OF A GROWING DOWNTOWN 1 AUTHOR Khedija Hentati, PharmD MBA Candidate (2016) University of Alberta, School of Business E: [email protected] P: 780 862 7466 DESIGNER Karrone Stephenson, Dip. Des + DM E: [email protected] TABLE OF CONTENTS Introduction: the history of the hotel industry in Downtown Edmonton.............................................4 The Hotel industry in Edmonton..........................................................................................................5 The Hotel industry in Downtown Edmonton.......................................................................................6 Overview Economic impact The performance of Downtown Hotels in the regional market............................................................8 The best in the province A Downtown that surpasses its competitors The great potential of Downtown and the expected increase in demand for hotels..........................12 The development of the hotels’ capacity and quality Improvement of the access to the city and to the Downtown The alignment of consumers' expectations and attractions offered in Downtown Marketing and promotion Refute misleading perceptions and reposition the Downtown..........................................................22 Conclusion Recommendations for excellence......................................................................................................24 “Tomorrow belongs to people who prepare for it today.” 3 THE HISTORY OF THE HOTEL INDUSTRY IN DOWNTOWN EDMONTON 2015 is a special year for the Tourism in Edmonton. Not only the hotel industry in Downtown is celebrating its 111th birthday, but also our city is, according to National Geographic, among the 11 best destinations in the world for this summer. The first Downtown hotel, ''The King Edward Hotel'', opened its doors in 1904, offering a place to stay for traders. At that time, Edmonton was a young city (1 year old), but the capital of fur trading. Tourism development is closely related to the demographic and economic growth. In 1914, the population grew by 30 times when Edmonton amalgamated with Strathcona. Consequently, a second hotel was built in 1915. In 1940, after the discovery of Oil in Leduc, the second economic boom occurred in the region resulting in the expansion of the 2 existing hotels at that time. However, since 1978, exactly when the LRT started operating, the architecture of the city has changed and suburbs emerged. Hence, Downtown population growth slowed down reaching even a negative 4.9% in 1996. Downtown Tourism was affected and no hotel has been built since 1978. 4 THE HOTEL INDUSTRY IN EDMONTON Today, Edmonton is Canada’s fastest growing city, and Downtown population In 2012, Edmonton received 6.49 million visitors among which only 2.89 is growing again at a fast rate estimated at 20.4% between 2011 and 2014. million (44%) stayed overnight. The visitors were essentially from Alberta (84%) and Canada (12%), which explains the low rate of overnight stays. Also, in 2014, the city issued roughly $2.6 billion worth of building permits In total, 2.35 million nights were booked including 15% for business and for the Downtown core, where 58% of the $10 million-and-more projects 26% for leisure (Travel Alberta, 2012). are planned. In addition, the closure of the ''Blatchford Field'' airport eliminated all height restrictions for the Downtown core, which is expected With an average daily spending of $112.5/visitor (DBA survey, 2015), to positively affect the density and the vibrancy of our city center. (City of an Average Daily Rate (ADR) of $81 and an average length of stay of 2.9 Edmonton) nights (Alberta Tourism, 2012), Edmonton generated an approximate direct expenditure in tourism of $1.5 billion in 2012. POPULATION GROWTH: EDMONTON VS DOWNTOWN 50% 40% YEG 30% YEG DT 20% 10% 0% 1976 1981 1986 1991 1996 2001 2006 2011 2014 -10% Capital city’s Downtown is not only home for the Oil and Gas industry but is also the location of choice to LIVE, WORK, SHOP, PLAY, LEARN and STAY! 5 THE HOTEL INDUSTRY IN DOWNTOWN EDMONTON OVERVIEW THE ECONOMIC IMPACT Downtown Edmonton is the most popular location in town as roughly The hotel industry contributes to the economic growth by creating jobs, 75% of potential visitors expressed their preference to stay in Downtown impacting the transportation and food industries, increasing visits to (DBA survey, 2015). This tendency is certainly related to the cultural, urban cultural attractions and raising the revenue of commercial retails. and culinary experience offered by the Downtown core as well as to the convenience of transport from and to Downtown. Based on the regional revenue per tourism expenditure category, the direct expenditure generated by hotels in the Downtown core can be divided Downtown total capacity is estimated at 2,472 guest-rooms and 14 hotels as following: $ 59 million spent in transportation, $92.5 million in auto (1 residence, 5 limited service, and 8 full service places) among the 84 in rental, $168 million in accommodation, food and beverage, $29.5 million town. in entertainment and $70 million in retail (DBA, 2015). Hotels in Downtown represent only 16 % of the total capacity of the city; nevertheless, it captures roughly 28% of the total demand in the region. In 2014, Downtown Edmonton received an estimated 1.8 million visitors. Hotels secured 660,000 room-nights among which 99,000 are for business and 171,000 are for leisure. Consequently, they added $420 million in direct tourism expenditure including $96 million as revenue for hotels (DBA, 2015). 6 ESTIMATED DOWNTOWN TOURISM’S DIRECT EXPENDITURE GENERATED BY THE HOTELS Accommodation, food and beverage $168 million Transportation $ 59 million Auto rental $92.5 million Entertainment $29.5 million Retail and other $70 million Total estimated Tourism’s direct expenditure $420 million Consequently, hotels in Downtown added roughly $208 million in tax (3 levels of government), 6873 jobs in the hospitality industry, $504,000 in value-added and $1.15 billion in gross output. ECONOMIC IMPACT OF DOWNTOWN HOTELS Value-added $504,000 Gross Output $1.15 billion Taxes $208 million Employment 6,837 jobs 7 THE PERFORMANCE OF DOWNTOWN HOTELS IN THE REGIONAL MARKET THE BEST PERFORMANCE IN THE PROVINCE OCCUPANCY RATES: DOWNTOWN, EDMONTON CITY & ALBERTA Assessing Downtown Hotels in their environment is a key to achieve a Alberta competitive advantage. We are proud to be the best performer when 0.74 compared to whole city and to the province. 0.73 Edmonton 0.72 Downtown Edmonton For the last two years, Downtown Edmonton outperformed both the city 0.71 and the province with the highest Occupancy Rate. 0.7 0.69 For 2013, Downtown's occupancy was estimated at 73.2% while that of the 0.68 city was close to 69.8% and that of the province was evaluated at 68.1%. 0.67 0.66 0.65 Similarly, in 2014 the Occupancy Rates were 73.4%, 69.2 % and 67.8% 2013 2014 for respectively Downtown, Edmonton and Alberta (PKF, National Market Report, December 2014). VARIANCE IN OCCUPANCY RATES: 2013 - 2014 0.004 For the Downtown core, not only the Occupancy Rate was the highest, but Alberta 0.74 also the growth in occupancy between 2013 and 2014 reached 0.3% while 0.002 0.3% 0.73 Edmonton both Edmonton and Alberta saw a retraction by respectively -0.9% and 0 0.72 -0.4%. -0.002 Downtown Edmonton 0.71 -0.4% -0.0040.7 -0.0060.69 -0.0080.68 -0.9% 0.67-0.01 0.66 0.65 2013 2014 8 On the other hand, Downtown was leading for two consecutive years (2013 REVPAR: DOWNTOWN, EDMONTON & ALBERTA and 2014) in the RevPAR surpassing Edmonton and Alberta. For 2013, RevPAR were $100.14, $88.84 and $94.11 for respectively 110 Alberta Downtown, Edmonton and Alberta. 105 Edmonton Similarly in 2014, the RevPAR of the Downtown estimated at $107.36 was 100 Downtown Edmonton higher than that of Edmonton ($92.63) and Alberta ($96.92). 95 90 Although the RevPAR growth (2013-2014) was important for both Edmonton (4.3%) and Alberta (3%), the increase of Downtown RevPAR 85 (7.2%) was once again the most prominent. 80 2013 2014 In conclusion, Downtown surpassed the city and the region in the occupancy, the Revenue Per Available room, and the growth of these two indicators. VARIANCE Variance IN REVPAR: 2013 in - 2014 RevPAR: 2013-­‐2014 0.08 7.2% 0.07 0.06 0.05 4.3% 0.04 3.0% 0.03 0.02 0.01 0 Alberta Edmonton Downtown Edmonton 9 A DOWNTOWN THAT SURPASSES ITS COMPETITORS During the last 2 years, Downtown Edmonton outperformed not only the regional market but also its direct Albertan competitor: Downtown Calgary. Edmonton and Calgary are the two economic capitals of the province and the tourism industry is similar in both cities. Even though Downtown Calgary has a higher capacity (26 hotel), a higher number of visitors, a longer average stay, higher Average Daily Rates and captures 39% of the demand (vs 28% for Downtown Edmonton), it doesn't perform as well as Downtown Edmonton, which shows a major growth potential. Concerning the Occupancy Rate, Downtown Edmonton showed a better performance during the last 2 years. For 2013, the rate for Downtown Edmonton was estimated at 73.2% while Downtown Calgary rate was close to 72.6%. Similarly for 2014, the occupancy rate saw a 1.9% decline in Downtown Calgary but a 0.3% increase in Downtown Edmonton (PKF, National Market Report, December 2014). For the RevPAR, in both 2013 and 2014, Downtown Calgary had a higher Revenue Per Available Room that can be explained by the higher Average
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