Ongoing financial challenges caused by the COVID-19 pandemic have influenced Calgary’s hotel industry to request tax relief from the municipal government.The Calgary Hotel Association issued a letter to Calgary City Council late January requesting an extended deferral on municipal property taxes and utility fees, with a verdict expected sometime this week.
The request comes as the Calgary hotel industry continues to struggle with low occupancy rates, staffing shortages and overall revenue loss linked to the pandemic.
“2021 was originally projected to be a very strong year for our industry, but, ironically, revenue was even lower than in 2020,” says Sol Zia, director of the Calgary Hotel Association.
“Since November of 2021, Calgary’s downtown and other regions across the city have been the worst performing hotel markets in the country,” he says.
According to the Calgary Hotel Association, the local hotel industry has lost an estimated $500 million of projected revenue since the pandemic began two years ago, and projections for 2022 suggest revenue loss could top half a billion dollars. Low occupancy rates due to travel restrictions is a key contributor to this, and some hotels are feeling the pressure.
“Our occupancy has gone down significantly,” says Neel Wignaraja, director of finance for the locally-based Hotel Arts Group.
“In 2019 we were running about 87% occupancy, and that has gone down to about 15 to 20% as international travel and corporate travel has reduced significantly. The hotel does get busy on the weekend for staycations, closer to the 75% range, but if you look at the average then we’re only at about 20% occupancy,” he says.
The government is offering some subsidies and financial relief options for the hotel and the tourism industry at the moment. The federal government is offering the Tourism and Hospitality Recovery Program and the Canada Emergency Business Account loan, while the provincial government has abated the Alberta tourism levy until March 31, 2022 for all hotels that have documented a revenue drop of 40 per cent or more. It is currently under review for further extension. On the municipal level, The City of Calgary has instilled a property tax deferral for hotels for 2021 and 2022.
However, according to Zia, the industry is still facing immense financial loss. He claims conditions have worsened and even more help is needed.
“Our current strategy, and the strategy for any industry impacted by the pandemic, is simply to survive and recover,” he says.
“We are requesting that the municipal governments consider more measures to support hotel survival. It’s certainly helped hotels to not have to pay some bills and to be able to keep a portion of cash flow available to cover payroll and basic operational costs. However, it would still have to be paid starting in early 2023, so it was essential to ask the city to consider further deferral,” he says.
According to Zia, the greatest challenges that Calgary hotels face has been maintaining a stable workforce as well as paying for bills and basic costs until recovery starts to happen.
“Being able to put off as many costs as the government can relieve will allow hotels to survive long enough to be in business in the summer when revenue will start coming back. They can pay their bills and pay their employees and maintain a happy, stable workforce, which is vital to the industry,” he says.
Our current strategy, and the strategy for any industry impacted by the pandemic, is simply to survive and recover. – Sol Zia
“My hope is that as we get through this quarter and the next quarter, and that all three levels of government align to support our industry,” he says.
While Zia says he doesn’t know what the package will look like from the municipal government, he says officials are looking at all options to help relieve costs for hotels and coming back with options by the end of this week.
“When you make a request you shoot for the moon, and any support the city can provide will be welcomed right now,” says Zia.