Canadian Market Delivers Growth for the All Suites Brands by Hilton
By Adrian Kurre Global Head, Homewood Suites & Home2 Suites by Hilton | December 01, 2019
This article was co-authored by Bhulesh Lodhia, President, JM Hospitality
In recent years, tourism in Canada has increased significantly, creating a wealth of new opportunity for hotel brands, developers and owners.
Spotting this early on, the All Suites brands by Hilton–Embassy Suites by Hilton, Homewood Suites by Hilton, and Home2 Suites by Hilton–have charted a course for long term growth in the Canadian market. At the end of 2018, the category reached its 30th property milestone in Canada with the opening of Homewood Suites by Hilton Ottawa Downtown–a dual-branded property with a Hilton Garden-and has plans to continue rapid expansion throughout the country. In fact, currently, more than 20% of Hilton's overall Canadian development pipeline consists of All Suites properties.
This robust pipeline is not only a reflection of savvy owners' and the Hilton development team's ability to recognize and deliver on an unmet demand for all-suite offerings throughout Canada, but a testament to Hilton's and the All Suites brands' overall reputation amongst travelers worldwide. Recognitions like Great Place to Work®'s 2019 Best Workplaces™ in Canada have boosted the All Suites brands' image within the Canadian hospitality industry, served as a powerful recruitment tool for top talent and fueled the healthy pace of growth in the region.
Beyond these factors, there are several circumstances at play that have contributed to the success of the All Suites brands by Hilton in Canada. The following is a review of the current state of affairs in the Canadian hospitality industry and the history of the All Suites brands presence in the region, as well as an examination what's driving continued growth in Canada.
The Canadian Market
Travelers are flocking to Canada like never before and driving up demand for new lodging options in traditional and non-traditional markets throughout the country.
In 2018, Canada received a record-breaking 21.1 million visitors, and total tourism revenues from domestic and international travelers reached $102.1 billion. This travel boom has attracted the attention of hotel companies, owners and developers from across the globe, and has resulted in a quickly escalating hotel development pipeline. According to HVS' 2018 Canadian Hotel Development Cost Survey, by the end of 2018 there were nearly 30,000 new hotel rooms and over 250 projects in development–more developments than any year since 2013–and supply is expected to continue on an upward trajectory.
This heightened global interest in Canada has been especially advantageous for hotel owners. In 2018, the country's RevPAR numbers reached record highs and ADR substantially increased year-over-year from 2017. The availability of competitive debt financing and investors seeking high-yield assets have also helped stimulate hotel development. According to data from STR, by the end of 2019, rates are expected to grow as new supply raises the rate ceiling for the entire country.
So, which Canadian locations are most ripe for development? Ontario and British Columbia are the nation's most popular provinces amongst tourists, and internationally recognized cities like Toronto and Montreal generate the most tourism revenue. This naturally aligns with where the most hotel development has occurred in recent years. In fact, in the past year, both Homewood Suites by Hilton and Embassy Suites by Hilton have opened new locations in Toronto. In 2018, Embassy Suites opened a property minutes from the international airport in Montreal, and there is a Homewood Suites currently under construction in the heart of the city's popular Midtown neighborhood which will open in 2020.
Another Canadian market with great potential for growth are suburban and 'surban' neighborhoods just outside the city center that demonstrate significant promise, especially for Homewood Suites by Hilton and Home2 Suites by Hilton. According to Colliers International Hotels' 2019 Canadian Hotels Investment Report, investors demonstrated heightened interest in secondary and tertiary markets in 2018, with the limited service properties, including extended stay hotels, representing the largest proportion of sales volume for the year. These markets have been particularly promising for Home2 Suites by Hilton, which currently has planned hotels in cities like Saskatoon, SK; Moncton, NB; Kitchener, Innisfil, Huntsville and Thunder Bay, ON; and Medicine Hat, AB – all of which are secondary and tertiary zones.
The All Suites Brands' Canadian Growth Story
While the All Suites brands are now helping drive Hilton's expansion in Canada, the entrance of Embassy Suites by Hilton, Homewood Suites by Hilton and Home2 Suites by Hilton into the region began with a much steadier pace of growth.
Embassy Suites by Hilton opened its first international property in Toronto in 1992, after which the brand continued slowly expanding in Ontario and into Quebec. Homewood Suites by Hilton would not make its first appearance into the market until 10 years later with Homewood Suites by Hilton Mont-Tremblant Resort in Quebec. From there the All Suites brands continued to gradually expand opening a collective 10 properties between 2002 and 2013.
Then about five years ago, which also marked the start of Canada's tourism boom, the All Suites brands development shifted from steady growth to rapid expansion. In 2014 alone, Homewood Suites opened six new properties in major cities like Winnipeg, Calgary and Halifax, and began to fan out to secondary markets like Ajax, Waterloo and Hamilton. Home2 Suites by Hilton also opened its first Canadian property in 2014, Home2 Suites by Hilton West Edmonton, Alberta. Since then, Home2 Suites by Hilton has opened seven locations across the country with eight more that are planned.
So, why the spike in activity? In addition to external factors such as Canada's tourism boom, Hilton's strategic development approach and owners looking for high-yielding products helped increase the All Suites brands' presence throughout the country.
Multi-Brand Builds and Flexible Design Spell Success in Canada
The multi-brand method has been a gamechanger for quickly gaining substantial market share in high-barrier-to-entry markets both in the U.S. and abroad. In Canada, JM Hospitality is one such developer that has tapped into the multi-brand development model using All Suites brands by Hilton to anchor in many of its multi-brand properties. The company recently completed a new dual-branded Home2 Suites by Hilton/Hilton Garden Inn in Brampton, and also broke ground on a dual-branded Home2 Suites/Tru by Hilton in Markham – both located in the Greater Toronto Area. JM Hospitality also has plans to begin developing a tri-brand Home2 Suites by Hilton, Tru by Hilton, and a Hampton by Hilton in the Greater Toronto area by 2020.
In addition, the new Homewood Suites by Hilton Ottawa Downtown, located in the capital of Canada, shares a roof with a Hilton Garden Inn, and there are approximately 10 multi-brand properties in Canada, most of which contain an All Suites brand.
The All Suites brands' flexible prototypes have also been helpful in recruiting owners to develop All Suites hotels in Canada. Embassy Suites' Design Option III, for instance, helps keep developers' costs down and enter spaces that once seemed restrictive by utilizing a Kit of Parts approach. Similarly, Homewood Suites by Hilton's latest prototype allows for a mix up to 85% studio suites to give owners more flexibility when building in urban and surban markets. The Home2 Suites by Hilton prototype is also highly adaptable to meet the needs of any given market.
The biggest driver of the All Suites brands' success in Canada, though, has been growing demand from consumers. Regardless of travel segment-long-term, short-term, business, leisure, etc.-the spacious suites and homelike amenities at All Suites properties have become increasingly invaluable to guests, and there has been a major push to educate Canadian travelers about the category's value-added offerings.
Being part of the Hilton engine and the company's marketing tools and vast operational resources is another key benefit for Canadian owners. The Hilton Honors loyalty program has also helped bring a wealth of new travelers to the Canadian market, as well as introduced Canadian residents to the warmth and light of Hilton's unique brand of hospitality. The Hilton Honors app, for instance, provides guests with a suite of digital resources which gives them the ability to customize every aspect of their stay right from their mobile device, such as booking an east-facing room to watch the sunrise through the room selection tool. The Digital Check-in and Digital Key features are especially useful, which allows guests to check-in and out, open their room door and access amenities directly from the app. These features have made a difference in breaking into markets across Canada, particularly areas that are unfamiliar with the all-suite model.
For many years, the all-suites sector in Canada has been a sleeping giant, and now that it has awoken, it's showing no signs of slowing down. The paradigm shift in Canada's tourism industry has spurred the growth of markets throughout the country and has stimulated a plethora of opportunities for hotel brands and developers. This heightened activity in the hospitality sector has even resulted in a new plan by the country's Minister of Tourism to grow Canada's tourism sector 25% ($128 billion) by 2025, which includes dedicated efforts to boost tourism beyond major cities and summer months.
Programs like these will continue to fuel hotel development throughout Canada, creating a diverse environment of lodging options well beyond what's available in the country today. As both international and domestic travelers continue to power Canada's hospitality industry, the need for high-quality hotel options will continue to rise and the All Suites brands by Hilton plan to continue expanding and spreading the light and warmth of hospitality through innovative and unique all-suites lodging experiences.
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