By Jeff Higley 
H&MM Managing Editor 

Toronto -  July, 1998 - Depending on who is talking, the Canadian lodging industry is either in a tremendous branding frenzy or it's business as usual. It all boils down to how numbers are interpreted in the industry, which posted $8.6 billion in revenue in 1997. 

Anthony Pollard, president of the Hotel Association of Canada, told attendees at the International Association of Hospitality Accountants last fall that hotel branding in Canada has grown from 11 percent of all hotels in the country in 1991 to 24 percent in 1996. 

Phillipe Gadbois, vice chairman of the HAC, said he expects the branding rate to rise about 5 percent over the next few years. "A lot of independents started looking at branding to see if they could get out of the recession," Gadbois said. "To no one's surprise, it helped level things out. The issue is to prove to owners that the expenditure is worth the return."

Lyle Hall, national director, hospitality, leisure & tourism practice for KPMG in Toronto, said there are about 775 hotels with 100 or more rooms in Canada. Of those, 74 percent are branded. Of the about 300,000 rooms in Canada, 43 percent (129,000) are branded.
 
"Branding has always been popular," Hall said. "The disparity [between branded properties and unbranded properties] is far less than what people thought." 

Craig P. Farrell, president and c.e.o. of Choice Hotels Canada, doesn't see it that way, especially when adding properties with fewer than 100 rooms to the equation. "There have been some significant changes in the marketplace," Farrell said. "Canada has been traditionally slow in accepting franchising in all areas." 

Choice is the second-leading hotel franchisor in Canada with about 19,500 rooms, behind Cendant Corp.'s nearly 30,000 rooms. Canadian Pacific Hotels, which earlier this year purchased Delta Hotels & Resorts, is third with about 17,300. 

"There has always been a limited and spotty amount of branding in Canada," said Marc Staniloff, president and c.o.o. of Calgary, Alberta-based Royop Hospitality Corp., which Staniloff said has Canadian territorial rights for Cendant's Super 8 and Wingate brands and is negotiating for Travelodge branding rights. "Now we're entering smaller markets that haven't typically had franchised brands before." 

Royop has opened 54 Super 8s with more than 4,000 rooms, including 46 properties in the last three years. Thirty more properties are in the pipeline, and Staniloff said he plans to have 100 open by 2000. 
 
 

Hall said there is no magic reason why KPMG chose to cut off its list of branded hotels at 100 rooms or more, but there had to be some cutoff point. 

"Lyle's numbers lead you to believe that we're close to the saturation point," said Daniel J. Couture, vice president of franchise development for Choice Hotels Canada. "I believe that we can double our current market segment in the under-100 rooms area." 

Choice, which develops its brands under one umbrella, and Cendant, which allows each brand to develop in Canada independently, choose to target smaller properties as a key ingredient for expansion. 

Couture said there are more than 7,300 lodging accommodations of 10 rooms or more in Canada, but about 5,000 of them have 40 or fewer rooms. He said fewer than 900 of the remaining properties have more than 100 rooms. "The larger the hotel, the more likely it is to be franchised," Couture said. Couture, who has spent the last four years in Canada, said when he first arrived in the country, he spent most of his time explaining the concept of branding. Now it is more widely understood and accepted, and that has been a boon for small properties. 

"We have some smaller properties that are ideally situated in their markets," Farrell said. "There isn't any magic formula when it comes to determining branding-it's if the market will bear it." 

Branding Smaller Hotels 

Choice Hotels Canada is in 53 of the country's 60 markets that have a population of 50,000 or more. Of the chain's 210 Canadian properties, about 130 (65 percent) of them have fewer than 100 rooms, Farrell said. Adopting smaller properties to the chain hasn't hurt its growth rate - Farrell said the company has enjoyed a 34-percent growth rate over the last five years with the addition of 58 properties. 

Staniloff said the reason for the 100-room division is that older, converted hotels are bigger than the properties being built today. In towns with older properties, a new build can own the market, he added. 

Independent hotel operators are more often turning to franchising after the national name builds down the street because of the benefits of a reservation system, Farrell said. "It truly makes it a global venture," he said. "They [independents] need to have a reservation system that allows them the opportunity to tap into the larger markets." 

Staniloff said visibility is key. He once put a flag on an independent property and watched the cash flow go up by more than 35 percent. 

Another reason for the increase in branding in Canada is the demand for it. One-third of the people in Canadian hotels are coming from the United States, according to Farrell. They want a recognizable name and the comfort of something they're familiar with. "Consumers are demanding it," Staniloff said. "The quaint little bed - and - breakfast is always going to be there if that's what you want, but dealing with frequent business travelers is a different story. They're not looking to buy the hotel. They just want to spend the night." 

Another reason for the rapid growth of branding in Canada is the availability of financing, Staniloff said. "There's a lack of available financing unless you have a franchise," he said. "The only way to build new is with a flag." 

Hall said that with new construction mostly in the limited-service segment, it's easier to get financing with a branded property. That means there's still plenty of branding opportunities out there. "It'll slow down only when there's nothing left to brand," Hall said.