Executive Summary
Growth in Canada’s hospitality sector has been steadily increasing over the last several years. According to the country’s key performance metrics, change in the nation seems to be moderate but stable. In 2018, the OR reached 66 percent, the highest in the nation. This year’s highest RevPAR was $CAD107, up from the previous year’s $CAD102. Between 2012 and 2018, the average daily rate (ADR) rose significantly (Jayawardena, Sovani & MacDonald, 2017). Investors are drawn in by the rising numbers. The Canadian hospitality business is diverse and ever-evolving, including independently owned properties and national and international hotel brands and franchises. More than half of the rooms and keys available at chain hotels are occupied by independent establishments. Brands from throughout the world have a stronghold on the market here.
There are more than 2,500 hotels with brand names in Canada, with native Canadian brands accounting for 15% of the total inventory and foreign brands accounting for 85%. More than 2,500 branded hotels are dispersed throughout Canada, although most are located in the mid-and upper-middle-class categories. There is no difference in market share between the budget and economy category and the high-end hotels, including boutique and lifestyle brand hotels. Roughly 18 percent of the total supply are budget and economy hotels, while luxury hotels, including lifestyle and boutique hotels, account for around 7 percent (Jayawardena, Sovani & MacDonald, 2017). The hotel sector in Canada consists of both independent and branded hotels. An overwhelming majority of the market belongs to overseas brands. More hotels are owned and operated by Wyndham Worldwide than any other company in the United States. There are a variety of hotels around the country run by Choice Hotels Canada and Best Western International, too. Coast Hotels dominate the Canadian brand sector.
This research paper aims to develop market research on the hospitality industry in Canada, focusing on four main areas: market research, analysis, positioning, and recommendations. The market research will include the Porter five forces and PESTEL. Market analysis will consist of the market’s SWOT analysis, mainly focusing on opportunities and threats. The market positioning section will identify the best market positioning to succeed in the industry, target markets, value of a proposition, and the competitive advantage. Lastly, the recommendations section will cover the brand tone and brand color.
The Porter’s Five Forces of the Canadian Hospitality Industry
Threats of New Entrants
Entry into the Hotel & Motel market is very easy; nevertheless, the high capital needs and food standards make it unlikely that new entrants will succeed. Travel and tourism are intrinsically tied to the hospitality business (Burke & Hughes, 2018). Because of the current economic climate, the accommodation market in Downtown Montreal is likely to grow. It is expected that RevPAR (Revenue per available room) would rise. The level of new entrants is categorized as ‘Moderate’ by these economic metrics.
The Threat of Substitute Products
Customers in the hotel sector are picky when it comes to both pricing and quality. There is no substantial danger of alternative items in the hotel industry, but purchasers constantly look at pricing, performance, and service quality when making a purchase decision (Burke & Hughes, 2018). The decreased Canadian currency may boost the replacement danger level to ‘moderate’ as a tourist attraction.
Degree of Competitive Rivalry
In the hospitality business, there is a lot of rivalry amongst the current participants (companies). The number of rivals, the development of the industry, and the cost of switching are all important (Heroux, 2017). The overall attractiveness of the sector in terms of the competitive competition is ‘high’ because of the vast number of hotel chains and the steady economic development outlook.
Bargaining Power of Suppliers
The hospitality industry has a small number of suppliers. Property owners, developers, real estate companies, training service providers, and I.T. consultants make up most participants (Heroux, 2017). Moving to a different, more cost-effective provider is not difficult. A modest amount of negotiating leverage is expected for suppliers in the Canadian lodging sector, as RevPAR (Revenue per available room) is likely to rise due to improving economic circumstances in Canada and the United States.
Bargaining Power of Customers
The Downtown Lodging Market is predicted to gain from a healthy market environment. With the transformation of 1500 rooms into student accommodation, the occupancy rate and revenue are likely to improve with an average daily rate of $174 (Heroux, 2017). The hotel market in Quebec is projected to improve this year. Globally, there is an increase in both supply and demand. Customer control is strong, and customers may easily move to a rival. Consumer bargaining power is considered ‘high’ according to these major measures of customer behavior.
The PESTEL Analysis of the Canadian Hospitality Industry
Political Environment
As a founding member of the United Nations, Canada has considerable influence. Maintaining excellent ties with the world’s most powerful nation is a priority for the country. Furthermore, it supports solid connections with nations such as the United Kingdom, France, and many others throughout the globe (Prud’homme & Raymond, 2016). With a low crime rate and trustworthy police services, Canada presents a very excellent environment for businesses and tourists. Canada has an open business program that aims to modernize the government by producing a quicker, better, and more efficient government-to-business service. Therefore, the current government will create a regulatory framework that serves the interests of companies while still safeguarding the general public.
Economic Environment
Canada has several free trade agreements. A noteworthy example is the CETA it agreed with the E.U. in September 2017. This agreement will allow Canadians and E.U. citizens to export goods and services. Canada, Mexico, and the U.S. signed the North American Free Trade Agreement in 1994. Canada’s economy is a mature mix of both. Canada’s citizens and government make national economic choices (Prud’homme & Raymond, 2016). A few industries are both public and private. For investors looking to start a company, Canada’s GDP has grown and increased by an average of 2% over the last several years, which is good news. A 1.3 percent rise in economic output and a 1.2% increase in service output were recorded.
Social Environment
Canada’s population is diverse. Canada promotes immigration, and anyone with the necessary skills and experience may apply. Outside of English and French, the country’s two official languages, over 200 languages are spoken in Canada. Religious freedom is a constitutional right (Prud’homme & Raymond, 2016). Consequently, Canada is a favorite destination for expatriates of all faiths. Since most Canadians are aged and retiring, the population increase is not good for a restaurant and bar company. Alberta, for example, had a 5% rise in the number of retirees but a substantial decline in the number of immigrants.
Technological Environment
Significant development of the technology sector has increased in Canada’s technical skill pool. For a bar and restaurant company, Canada is the best country to operate digitally since, by 2026, technology occupations and disciplines will enjoy double-digit growth, including computer user technicians.
Environmental Issues
The awe-inspiring landscape attracts tourists from all over the globe. Many of Canada’s most popular tourist spots are within driving distance, including Niagara Falls, Banff, Rocky Mountains, Toronto, Vieux-Québec (Old Quebec), Whistler, Vancouver Island, and Gros Morne National Park in Quebec. Canada’s weather may be divided into two distinct seasons: the hot, humid summer and the cold, snowy winter (Prud’homme & Raymond, 2016). As with the rest of the northern hemisphere, Canada has a mild and rainy climate year-round. Every hour, Canada’s air quality health index is updated on the government’s website to monitor any indications of pollution. As a result, Canada has low levels of air pollution, making it an ideal location for businesses in the hospitality sector.
Legal Environment
Several governments and consumer service agencies in Canada have made it easier for companies to apply for licenses and permissions by issuing registrations and applications for various licenses and permits (Prud’homme & Raymond, 2016). So applying for a business permit or license may not be time-consuming or costly since the bodies are active and operational to guarantee that every new firm has its legal documentation available.
Market Analysis of the Canadian Hospitality Industry
SWOT Analysis
Opportunities
Since Canada is politically, economically, and legally stable, it is a good investment opportunity for foreign investors in the hospitality industry. The low dollar provides more bang for the buck, and the cost of debt is lower than in many other countries. Canada also has excellent air, sea, and road infrastructure (Murray et al., 2017). 98% of investors plan to expand their portfolio this year. Many in the hospitality sector are looking for the “COVID discount” of more than 20% that would allow them to acquire core and distressed assets that could be used in re-purposing initiatives based on the findings of Colliers International Group’s Global Capital Markets 2021 Investor Outlook survey.
Threats
The low oil price, interest rate reduction, and the strength of the U.S. currency all make Canadian hotel investments very volatile. Over the last several years, inflation has risen beyond 4% year-over-year, driven by the consequences of the economic crisis and supply-chain issues throughout the world (Murray et al., 2017). The supply chain challenges affecting ports and truckers are continuing and will continue to increase costs, despite the expected restoration to normal levels.
Market Positioning
Canada’s political, economic, and legal stability and the cheap currency give Canadians more bang for their buck, and the cost of financing is lower than in many other nations. Therefore, it is critical to examine competitiveness and overcome this barrier. Hotels and other hospitality establishments may consider developing positioning strategies, such as a competitor-based positioning plan, to remain competitive in the marketplace (Chand & Sharma, 2021). Using a competitor-based positioning strategy, the goal is to differentiate oneself from the competition. Companies use substantial differences in their marketing to distinguish their products or services from their competitors and make them seem more enticing and different. A unique item or service is created as a result of this.
Brands may also take cues from the tactics of their competitors. When it comes to positioning strategies, a large brand must appeal to a wide range of consumers. As a result, one ought to try to convert some of their customers by providing a comparable product with similar features and at the same price point. For example, the hotel can develop a music-filled theme in which it plays beautiful music centered on the concept of love to attract young couples and beat the competition. Rather than focusing on increasing revenue, this strategy will shift the hotel’s focus to providing better service to its guests (Chand & Sharma, 2021). Furthermore, the hotel may place a strong emphasis on embracing customers from various socio-economic backgrounds. The positioning statement will be a music-themed hotel that blends cutting-edge technology and embodies the ideals of the millennial age to provide guests with a one-of-a-kind accommodation experience.
Target Market
Among the major consumer market segments that the hotel wants to target are those based on demographics and behavior. As an example, age, gender, and income are all factors that may be utilized to segment the market. Instead of attempting to reach the whole market, the hotel will employ this strategy to concentrate its efforts on a specific portion of the people in the target market instead (De Lange & Dodds, 2017). According to the behavioral segmentation approach, consumers are classified based on their interactions with one or more brands. Overall, this is concerned with a certain customer’s purchasing habits and preferences. Suppose one wants to get the most out of my major client base, the so-called “tech-savvy generation,” including millennials. In that case, I propose that they use demographic segmentation to better target my marketing efforts. Since we live in a technologically advanced society, my generation is more educated in music and more aware of current music trends than prior generations. A love song is undoubtedly a possibility when it comes to musical genres. These dedicated couples form the majority of the target market, notwithstanding the challenges. If one includes love themes in their hotel’s messaging, guests will undoubtedly feel appreciated and valued. Thus, as a result of this expansion, the company’s brand equity will expand beyond national borders.
Final Recommendations
If I were to invest in the Canadian hospitality industry, my target market would be coupled, including the youth and the aged. The hotel will be music-based, focusing on love songs that will attract both the aged and the child. Furthermore, the hotel will incorporate modern technology with music to accommodate the two classes of clients. Since the country is politically, economically, and legally secure, competition will peak. I believe the combination of the music theme and modern technology will give the hotel a cutting-edge industry. The hotel will be customer-centric, offering quality services and the best customer care and support to its clients.
References
Burke, R. J., & Hughes, J. C. (Eds.). (2018). Handbook of Human Resource Management in the Tourism and Hospitality Industries. Edward Elgar Publishing.
Heroux, L. (2017). Comparative marketing strategies of fitness clubs in the United States and Canada. Economics World, 5(6), 529-538.
Kim, W. G., Choi, H. M., & Li, J. J. (2016). Antecedents and outcomes of migrant workers’ sociocultural adjustment in the hospitality industry. International Journal of Hospitality Management, 58, 1-12.
Prud’homme, B., & Raymond, L. (2016). Implementation of sustainable development practices in the hospitality industry: A case study of five Canadian hotels. International Journal of Contemporary Hospitality Management.
Jayawardena, C. C., Sovani, A., & MacDonald, A. (2017). State of the Canadian hospitality and tourism industry. Worldwide Hospitality and Tourism Themes.
Murray, W. C., Elliot, S., Simmonds, K., Madeley, D., & Taller, M. (2017). Human resource challenges in Canada’s hospitality and tourism industry: Finding innovative solutions. Worldwide Hospitality and Tourism Themes.
Chand, M., & Sharma, K. (2021). Management Accounting Practices in Indian and Canadian Hotel Industry: A Comparative Study. International Journal of Hospitality & Tourism Systems, 14(2).
De Lange, D., & Dodds, R. (2017). Increasing sustainable tourism through social entrepreneurship. International Journal of Contemporary Hospitality Management.
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