Canada’s Hospitality Industry - moving from 2020 into 2021
In mid-March 2020, when the Prime Minister asked us to go into the first lockdown, we closed the Vancouver office expecting to return in a few weeks. We didn’t even properly clean out the fridge.
We didn’t anticipate that almost a year later, like many organizations, we would not have returned and would still remain working remotely. We didn’t anticipate that the incredible drop in our open orders would be so immediate, and last for such an extended period of time.
When it became apparent these weren’t temporary measures, we, like the service industries we serve, weren’t certain we would survive. We consider ourselves fortunate that associations for those industries used their powerful reach to lobby hard. While it took longer than anticipated, our government stepped up with wage and rent subsidies and capital injections that have helped save the day and bridge us to the other side of the worst of Covid’s financial impact. We know for the travel and tourism, accommodation and food service sectors, many have not been so lucky.
Almost 11 months into this crisis, Ontario and Quebec remain in lockdown, though reports are that Quebec is reopening some portions of its economy as of the week of February 8. Ontario, our biggest province, remains without a plan to end its full lockdown. 2020 is now thankfully in the rear-view mirror but what is around the corner for this sector remains unclear.
2020 as a foundation for 2021
There are 8,300 hotels in Canada employing more than 300,000 people. We’re fortunate to be able to report that few prominently named hotels have been shuttered, but STR’s final results for 2020 show occupancy for the year ended at 30.9%, with ADR declining just over 20% to its lowest level since 2012. April was the worst month of the year at 14% occupancy, and February was the last time occupancy for Canada was above 50%. Year-over-year (YOY) declines across the three key performance metrics were the worst the country has seen.
Thanks to the combined work of the Coalition of Hardest Hit Businesses (CHHB), government initiatives such as extending the Canada Emergency Wage Subsidy (CEWS) to summer of 2021 to assist with labour costs, expanding the Canada Emergency Business Account (CEBA) to help businesses with other operating costs, and the creation of the Business Credit Availability Program (BCAP) and the Highly Affected Sectors Credit Availability Program (HASCAP) to provide additional access to working capital have all made a substantial difference.
However, until restrictions on mass gatherings and travel are eased, the business travel, events and conferences which are the core of the business won’t return. The longer this takes, the more challenging the liquidity situation becomes for independent owners who make up the vast number of operators in the sector. We’re still in the thick of it and not out of the woods, according to Susie Grynol, President of the Hotel Association. For those who can hang on, we are hopeful better times lay ahead.
Restaurants and Food Service Operations
The current state of this industry is obviously challenging, and we know optimism is in short supply. March and April 2020 marked the lowest monthly foodservice sales in over 2 decades. Although there has been some improvement since, the dramatic decline in tourism and business spending, combined with consumers reluctant to dine in-doors, are restraining the recovery. According to Statistics Canada, sales in the food services and drinking places subsector declined 3.7% to $4.5 billion in November 2020.
As a result, according to Restaurants Canada, more than eight out of 10 independent operators have said they’re either barely staying afloat or are operating at a loss. As of a month ago, it’s estimated that 10,000 restaurants have closed since March 2020 - approximately 1 out of every 10 then in operation. Most restaurants are operating in survival mode, trying to get through one day at a time.
2020 was a pivotal point for the sector - it was clear from the start of the pandemic that radical innovation was required, and restauranteurs and food service operators rose to the occasion. Restaurant owners and operators have run their businesses more efficiently and flexibly, streamlined their menus, and reduced their costs. Foodservice operators like Earls decided to add groceries to the offerings when staples were in high demand and short supply. Some restaurants opened outdoor patios on streets and sidewalks, and developed meal kits. Even fine dining establishments embraced delivery and takeout, and then there was the acceleration of ghost kitchens. Without these measures, the industry would have seen even more closures and it would have changed the face of the industry indefinitely.
There are also countless inspiring stories of resilience and community support. We were heartened by industry-based initiatives like the Bartenders Benevolent Fund, or the Chef driven initiative for the Canadian Hospitality Worker Relief Fund (CHWRF), who took it upon themselves to help our own community and support restaurant and hospitality workers who were financially impacted by the pandemic.
Yet clearly what’s happening right now in the food service industry is certainly not sustainable, with businesses hanging on by a thread and 21% of the restaurant workforce not yet recovered. And shifting government health regulations mean confronting the fact there’s no stable long-term or even medium-term plan – the industry is at the mercy of the virus and how provincial governments respond.
According to Statistics Canada, in February 2020, the month before the pandemic hit, Canada’s unemployment rate was 5.6%. It peaked at a record high in May 2020 when it leapt to 13.7% as the economy ground to a halt. 2020 finished with Canada’s unemployment rate at 8.6% as of December 2020, well down from that record high of seven months before.
There is no good news here for Canada’s hospitality industry. According to Statistics Canada, in December 2020, employment in accommodation and food services fell for the third straight month, down by 57,000 (-5.8%) from the previous month and down by 129,000 (-12.4%) from September’s 2020 peak. Compared to pre-pandemic levels in February, national employment in accommodation and food services was down by half in April (-50.0%), down by 15% (15.3%) in September, and then down by one-quarter (-25.8%) in December.
In 2020 the tourism sector was hit particularly hard. Before the pandemic, according to Tourism HR over 2 million Canadians worked in the tourism sector, and 880,000 had lost their employment by April. And unlike some other sectors of the economy, tourism has faced ongoing challenges getting people back to work.
The Tourism sector includes Accommodation, Food Service, Recreation and Entertainment, Transportation, and Travel Services. According to a recent report on tourism industry employment by the HR Tourism Council, the accommodation industry was the hardest hit proportionally, with employment down 30% - a loss of 56,000 employed workers. The food and beverage services industry lost the greatest number of workers (212,000), with employment falling from 972,500 in 2019 to 760,200 in 2020, a loss of 22%. In every single province, the tourism unemployment rate was higher than the overall unemployment rate.
And what’s important to note here is who the industry employs - these are some of the most vulnerable Canadians, predominantly women, millennials, immigrants and visible minorities.
Fortunately, the hospitality sector remains resilient even in the face of an uncertain future. The underlying driver of hospitality, the very human need to gather, celebrate and connect, is strong. We feel this ourselves – the team at JRoss can’t wait to see family, friends and industry colleagues, and we hear the same from everyone we speak to. This is creating anticipation of pent-up demand delivering growth in Q3-Q4, when the industry will be able to leverage what was learned from 2020 to deliver new and varied guest experiences. We look forward to better years ahead.
To learn more on this and other hospitality trends and insights you can check out our blog.
JRoss remains intact.
Throughout the pandemic, our focus has been on continuing to deliver for our clients and maintaining our team of Canada’s leading hospitality recruiters. We’re happy to report that we made it through 2020 with our delivery team intact, and we’re now actively working on dozens of mandates at all levels from front-line management through to the executive suite. You can view these great opportunities on our website.
Even if you’re not in an active job search, don’t forget to connect to us through our company LinkedIn page, Facebook and Twitter to share relevant hospitality industry news, networking tips, and current roles we’re working on. Your resume should also be up to date in our system. Please keep us updated with any new changes in employment status and contact information so we can connect with you if your next great career opportunity crosses our desks. And if there’s one other key thing you can do to increase your exposure, it would be to fully optimize your LinkedIn profile to increase the likelihood that you will show up positively in the search results when recruiters are sourcing candidates that match your set of qualifications, education and experiences.