ADR is a matter of attitude

TORONTO—Average daily rate (ADR) “is a matter of attitude rather than math, and the revenue management function is not serving us all that well.”

So says David Larone of PKF Toronto at the 2011 PKF Outlook Forum held Oct. 6 at the Hyatt Regency on King.  A similar forum was held at the Terminal City Club in Vancouver on Oct. 4.

“We’ve got the occupancy and volume pieces in 2011, but not the ADR growth,” he noted.

Fran Hohol of PKF Toronto noted that even in the downturn, there is still positive overnight travel demand, but the difference is that the numbers include people staying with friends and family—something that happens more frequently during a recession.

National accommodation grew by about 6,000 rooms per year from 2009 to 2011, but in 2012 PKF expects only 4,000 rooms or 1.1 per cent of supply will be built, the lowest level since 2005.  And 55 per cent of that supply will be in Western Canada.

On the demand side, 2010 was positive due to the Olympics and the G7.  We’ve had a very significant recovery of lost hotel demand, according to Brian Stanford of PKF Toronto.  But in 2010, demand levels were still 2 per cent below benchmark 2007 levels.  And demand projections show that it will be only 1 per cent ahead of 2007 levels by the end of 2012.

Significant factors for 2012 include less convention business in major markets, less new supply, and muted supply growth, but volume of demand is not a problem.